Small businesses collapsing under the weight of rising health insurance costs would have greater flexibility to band together and offer employees scaled-down coverage under legislation that has gained new life in the Senate.
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.”
But, year after year, the Senate has declined to take up the measure. That could soon change.
The Senate’s Health, Education, Labor and Pensions Committee, led by Sen. Mike Enzi of Wyoming, is expected to approve the legislation Wednesday. The House has approved similar bills eight times.
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 businesses increase their leverage when negotiating the terms of their insurance coverage, which the administration says 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 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 plans 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.