Senate Committee Considers Association Health Plan Legislation

The Senate Small Business Committee on Feb. 5 debated a proposal that would permit association health plans, allowing small businesses to purchase health insurance for their employees through national trade associations, the St. Louis Post-Dispatch reports. Testifying on Feb. 5, Labor Secretary Elaine Chao said that AHPs are part of the Bush administration's "multi-pronged strategy ... to reduce health care costs" (Livermore, St. Louis Post-Dispatch, 2/5). She added, "AHPs will break down many of the barriers small employers face in trying to offer health coverage." Small Business Committee Chair Olympia Snowe (R-Maine) said, "Let there be no doubt, there would be cost savings" for small businesses under AHPs (Rovner, CongressDaily, 2/5). Sen. Jim Talent (R-Mo.) added that the proposal would "dramatically expand coverage" to some of the 40 million uninsured people in the United States, the Post-Dispatch reports (St. Louis Post-Dispatch, 2/5).

Some Skeptical
However, Kansas Insurance Commissioner Sandy Praeger, testifying on behalf of the National Association of Insurance Commissioners, said that AHP legislation "would put consumers at significant risk and disrupt the health insurance market." She added, "The fragmentation of the small group market will leave many small businesses with higher premiums, or no coverage options at all." But Jack Faris, president of the National Federation of Independent Businesses, which supports the bill, said that the insurance industry "vehemently opposes" AHPs because it is "not fond of the competition that AHPs would bring to bear." Len Nichols, vice president of the Center for Studying Health System Change, said that AHPs could lead to adverse risk selection, meaning that younger, healthier workers would find other coverage and drop out of AHPs, leaving sicker workers behind. He added that three years ago, the Congressional Budget Office estimated that as healthy workers left the broader small business risk pool, health plan premiums would rise for about 20 million workers (CongressDaily, 2/6). Consumer groups, such as Consumers Union, also testified that the proposal could allow AHPs to avoid meeting state-mandated coverage requirements (St. Louis Post-Dispatch, 2/5). Indiana Gov. Frank O'Bannon (D) and North Dakota Gov. John Hoeven (R) told Snowe in a letter that the AHP legislation "would only tie our hands and exacerbate the task before us" (CongressDaily, 2/6).