New drive to pass AHP legislation is under way

Washington -- Small business groups have relaunched an effort to push through association health plan legislation designed to allow them to band together to increase their negotiating power. But some experts continue to warn that AHPs would make the struggle with rising health benefit costs worse instead of better.

Bipartisan legislation that would allow association health plans to be regulated under federal rather than state laws has been introduced in Congress with a nod from President Bush.

The bills set rules by which established groups could follow federal rules, which often are more relaxed than state laws, to offer insurance products to their members across the country. The measures also would move the responsibility for overseeing the plans from state insurance commissioners to Dept. of Labor officials.

"It is common sense to believe it costs less to set up and administer a plan where you can spread the costs over a pool of hundreds of thousands of people, rather than a pool of five or 10 employees," Sen. Jim Talent (R, Mo.) said in a floor statement introducing an AHP bill he co-sponsors with Sen. Olympia Snowe (R, Maine). A companion bill has been introduced in the House.

That notion is supported by many small firms, according to the National Federation of Independent Business, a trade group for such companies.

"Just like buying a case of soda at a supermarket costs less per can than buying 24 individual cans at a vending machine, [association health plans] would allow groups like NFIB to buy thousands of health insurance policies at a lower per-policy cost and pass those savings along," the group says in a statement.

Proponents also say the bills would remove the burden of state coverage mandates, which have been shown to push up the price of premiums.

But opponents, which also include business interests, argue that association plans would do nothing to address the underlying problem.

"How do we lower the overall cost of health care?" asked Todd McCracken, president of the National Small Business Assn. "AHPs don't do it."

While the bills would remove the burden of state mandates, they also would remove state protections, such as restrictions on changing insurance rates, designed to help business, opponents note.

"Federal AHPs would be able to raise rates for small businesses -- by as much and as often as they want -- when someone in the group becomes sick," said Mary Nell Lehnhard, senior vice president of the BlueCross BlueShield Assn. "AHPs could raise rates every month without limit."

Critics of the legislation say AHPs have the potential to lower prices for a handful of small businesses, but the plans would result in much higher rates for everyone else. AHPs would be allowed to charge lower rates to attract companies with relatively healthy workers, destabilizing the current market and pushing up prices for companies with older or sicker employees, they explain.

"Multiple studies, including [one by] the Congressional Budget Office, show that the majority of small business owners will see rate increases if the AHP bill becomes law," Lehnhard said.