Small Business Health Plans Forward

March 27, 2006
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WASHINGTON, D.C. — Small businesses may have a new opportunity to save money on health insurance, if a bill recently approved by a Senate committee survives its journey up Capitol Hill and becomes law. The Health Insurance Marketplace Modernization and Affordability Act would allow for the creation of a new class of health insurance: the small business health plan. And while that prospect has many business owners across the country watching in anticipation, it has some states and consumer advocacy groups on the defensive.

In simple terms, the bill would allow small businesses to band together and provide group health insurance on their own terms. If that sounds familiar, it's because some variation of the same concept has been on the table for over a decade. Numerous versions have passed in the House of Representatives, but have invariably lost traction in the Senate. This bill, introduced by Wyoming Republican Michael Enzi, takes many features from the failed House attempts, but adds in some protections aimed at appeasing state regulators and consumer protection organizations.

Those groups are concerned for two primary reasons. First, they fear that state regulation, such as Michigan's Patient Bill of Rights, would be circumvented if the association plans were federally regulated. Secondly, they are worried that associations would be free to "cherry pick" the best, healthiest members to join their plans, thus lowering their risk and the associated premiums. In turn, those with the highest risk factors might find themselves unable to afford or to access health insurance.

Enzi's bill tries to allay those fears. The proposal would, according to Enzi, streamline "the current hodgepodge of varying state regulation," while simultaneously preserving a "strong state role in insurance oversight and consumer protection."

"With the help of a diverse group of senators and business groups representing small business, we've bridged the gap between small business proponents of traditional association health plans and state-based interests worried about the prospects of dramatic regulatory changes in health insurance markets," Enzi said in a statement following the 11-9 passage of the bill by the Senate's Health, Education, Labor and Pensions Committee.

According to an analysis of the bill, Enzi has succeeded in improving the previously suggested association health plan model. The Milwaukee consulting firm of Mercer Oliver Wyman prepared a comparison of Enzi's bill and 2003's Small Business Health Fairness Act, the most recent failed attempt at association health plans. The Mercer study found that the new proposal is superior in a number of aspects.

If Enzi's bill should be fully implemented, the report found, small businesses would see an aggregate savings of 12 percent on health insurance premiums. New risk rating models, new pricing and other factors would attract roughly 900,000 currently uninsured individuals to the small business health plans, a marked improvement over the previously proposed plans. The report goes on to suggest that while this legislation would be effective in stemming the increases in health insurance premiums, it would do nothing to address the underlying increases in health care costs.

Despite Enzi and his colleagues' efforts to make the small business health plan proposal more palatable for opponents of previous association health plans, there is still opposition.

For starters, the hodgepodge-streamlining Enzi referred to largely pertains to differing levels of coverage that are mandated by various states. The rule of thumb that Enzi's bill uses is that only those benefits mandated by at least 45 states would be mandatory for all small business health plans. So, for example, California's mandatory cancer screenings that are required of all state-licensed health insurance providers would not be required of the nationally licensed small business health plans. Therefore, those plans could provide more stripped-down coverage for a lower price. To prevent that unfair competition, Enzi amended the bill to allow HMOs and other state-licensed insurers to opt out of state mandates, in order to "level the playing field." That has consumer groups agitated.

"The effect of this legislation will be to deregulate the entire health insurance market," wrote consumer advocates from the Foundation for Taxpayer and Consumer Rights. The watchdog group pleaded with Enzi to change provisions in his bill allowing for what the group calls "junk health care."

"(This bill) could mean the loss of state benefits such as a California woman's right to visit an OB-GYN, a New Jersey child's access to a hepatitis B inoculation, and a Tennessee patient's coverage for diabetes treatment," the letter to Enzi read. "A panoply of patient services could also be eviscerated including cornerstone patient protections such as access to a second doctor's opinion, and the right to independent medical review when an insurer denies access to treatments."

The state of Michigan has not yet made its position clear on small business health plans. In 2003, Linda Watters, commissioner of the office of financial and insurance services, spoke out against the proposed association health plans being discussed in Congress at the time. That office is currently reserving judgment, according to Chief of Staff Ken Ross.

"We are monitoring it, as it's primarily being negotiated from the states' perspective by the National Association of Insurance Commissioners," he said. "We haven't taken a position on it. This bill is still in play, and it looks like there has been some positive movement on it. Some amendments have been made on it. … We're obviously pleased with the progress that's been made on the bill, but there are still a few things we'd like to see (synchronized) between the way the bill is set up now and the way our current state insurance regulation system works."

Ross said that he personally believes Enzi's bill to be better than past association health plan proposals, because it makes an effort to work within the existing regulatory framework.

Having moved out of committee, the bill will now go before the full Senate for discussion. A schedule for consideration of and voting on the bill will likely be set this week when the Senate returns to session.    

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