House Passes Cheaper Small Business Insurance

Small businesses would be able to join together to buy lower-cost health insurance under a bill passed Tuesday in the U.S. House of Representatives.

The bill passed Tuesday evening by a wide 263-to-165 margin but still remains controversial in the Senate.

The programs, known as association health plans, are designed to decrease health costs for small employers, who usually pay higher prices than large companies do for workers' coverage.

To cut costs, Tuesday's bill exempts the plans from state coverage mandate laws, often including minimum maternity hospital stays, equal insurance limits for mental health treatments, and other requirements. Forty-nine states have some form of the mandates in place.

"These mandates drive up the cost of premiums," says Rep. Sam Johnson (R-Texas), who leads the House subcommittee on employer-employee relations.

Rep. John A. Boehner (R-Ohio) says that what workers using the plans would lose in guaranteed coverage they would gain in cheaper insurance.

The best patient protection for uninsured working families is access to affordable health care benefits," says Boehner, who leads the House Committee on Education and the Workforce.

Boehner and other supporters marked the bill as a way to cut down on the 45 million Americans without medical coverage. Many of them work full time in small firms but cannot afford to purchase coverage because of high and rapidly rising health insurance costs.

Read WebMD's "Choosing and Using a Health Plan"

Impact Uncertain

But the actual impact on the ranks of the uninsured remains an open question. A 2003 study performed by the Mercer research group concluded that businesses participating in AHPs would realize a 10 percent average cut in premiums. At the same time, the plans could raise premiums for companies keeping traditional insurance by as much as 23 percent.

The report further concluded that while 8 million persons could gain coverage through AHPs, as many as 9 million could lose it as older forms of insurance become more expensive.

Read WebMD's "More Than 1 in 10 Lack Health Insurance"

What Opponents Say

The exemptions could allow plans to "cherry pick" only the youngest and healthiest workers, leaving sicker and more expensive workers with standard insurance, opponents say.

"This bill will not result in a reduction in the number of uninsured," says Rep. Robert E. Andrews (D-N.J.). "When the premiums go up on the rest of the pool, fewer people will be insured."

Consumer groups oppose the plans because they avoid state coverage minimums and because they would operate outside of state laws barring insurers from denying coverage or charging higher prices to businesses based on their workers' health status.

Tuesday's bill marked at least the eighth time association health plans legislation has passed the House of Representatives. Each time, the measures have been blocked by the Senate.

Following the vote, President Bush released a statement praising AHPs as "a fair, innovative, and commonsense approach to make health insurance more affordable and accessible." Bush urged the Senate to also pass a bill legalizing AHPs.

Read WebMD's "Medicare Heading for Financial Crisis"

Senate Hurdles

The bill faces high hurdles in the Senate. Sen. Mike Enzi (R-Wyo.), who leads the Committee on Health, Education, Labor, and Pensions, has said that Tuesday's House bill does not have enough support to pass the Senate.

Enzi said he is trying to work out a compromise between traditional health insurers and small business groups that will soon lead to a different legislative take on AHPs.

"This is something members of Congress have been asking for," Enzi told reporters.

Rep. Charles Norwood (R-Ga.), who leads the House subcommittee on workforce protections, said on the House floor that he would reluctantly support AHPs though he would attempt to alter the legislation before it reaches Bush's desk.

"If you start getting sick, you're going to be in trouble because the premium is going to be so high that you can't afford it," Norwood said. "I dearly hope I'm wrong."

By Todd Zwillich, reviewed by Michael W. Smith, MD

SOURCES: Rep. John A. Boehner (R-Ohio). Rep. Robert E. Andrews (D-N.J.). "Impact of Association Health Plan Legislation on Premiums and Coverage for Small Employers," Mercer Risk, Finance & Insurance, June 2003. News release, President George W. Bush. Sen. Mike Enzi (R-Wyo.). Rep. Charles Norwood (R-Ga.).