U.S. Senate Breathes New Life into Small Group Health Option

The Senate Health, Education, Labor and Pensions Committee yesterday ended a stalemate over a decade old and voted in favor of a landmark bill to allow business and trade associations to band together to purchase group health insurance.

The bill was approved by an 11 to 9 vote. While the full Senate has failed to act on similar legislation for years, the House has approved similar bills eight times. The Bush administration supports the measure.

“Today’s vote is the first major step in 15 years toward more affordable health insurance options for small business and working families,” Senator Mike Enzi (R-Wy.), chairman of the HELP Committee said. “The people who make up the bedrock of our economy – small, family owned businesses, have issued a mandate for change. It’s time for the Senate to pass this bill. No more excuses.”

The bill, “The Health Insurance Marketplace Modernization and Affordability Act,” S.1955, was introduced by Enzi and cosponsored by Senator Ben Nelson (D-Neb.) and Senator Conrad Burns (R-Mt.).

Supporters say it is way to give small businesses collapsing under the weight of rising health insurance costs greater flexibility to band together and offer employees scaled-down coverage.

But opponents contend it would encourage “cream-skimming” by insurers and end up leaving workers without adequate coverage.

President Bush has been promoting association health plans, as the coverage is called, since taking office. He did so again last week after giving a speech to newspaper publishers, saying, “I fully understand the pressures being put on small businesses because of rising health care costs.”

The administration wants to let small companies join together, based on their membership in a particular trade association, to purchase health insurance policies exempt from state coverage requirements, such as cancer screenings.

By joining together across state lines, the theory behind the bill says, businesses can increase their leverage when negotiating the terms of their insurance coverage. The administration says this can lead to lower prices and at least some company-sponsored coverage for employees. The exemption from certain state mandates and regulations also could lead to lower costs for the businesses.

For example, Tennessee requires insurance plans to cover mammographies. California requires its plans to cover prostate cancer screenings and emergency room care. When insurers don’t have to cover those requirements, they can offer more basic coverage at a lower price.

But critics, including associations of state regulators, consumer groups and independent insurance agents, say that letting insurers bypass state protections gives consumers a false sense of security.

“People will think they have coverage, but when you need health care, when you need treatment, your insurance company will say, ‘no, look at the fine print,”‘ said Jerry Flanagan, spokesman for the Foundation for Taxpayer and Consumer Rights, a Los Angeles-based advocacy group.

Trade groups representing small businesses said state regulations have made coverage too expensive for many small employers, so they’re dropping coverage altogether. The businesses should be able to buy less costly coverage, even if it’s less comprehensive than some would like.

“If small businesses want to buy the high-cost option and they can afford it, great,” said Amanda Austin, manager of legislative affairs for the National Federation of Independent Business. “If they don’t, why can you not offer them lower-cost options?”

Enzi, a Republican, is leading the effort to move the health plan legislation through the Senate. He tried to appease state regulators by giving them some oversight authority. They would still oversee allegations of fraud and will still certify the plans. Under previous bills, the Labor Department would have handled all regulation of the plans.

At the same time, his bill would require that insurers offering the scaled-back coverage also offer a more comprehensive plan.

“We need to give small business owners a safe place to get off this escalator of rising costs,” Enzi said last week.

Sen. Ted Kennedy, D-Mass., said association health plans would make it easier for insurers to target their coverage to businesses with healthier workers. The result would be higher premiums for businesses that stick with traditional coverage, and more uninsured, he said.

“For far too many of our citizens, it will result in higher health costs and fewer benefits,” he said.

Editor’s Note: Some Associated Press reports were used in this story.