Pros, cons of association health plans debated

Washington -- Association health plan legislation is again moving through the House, and Senate proponents hope that this year it will pass in the upper chamber for the first time.

Legislation to allow AHPs to operate nationally recently was approved by the House Committee on Education and the Workforce, clearing the way for a full House vote. It also has recently been the subject of Senate hearings.

"AHPs are crucial to solving the small business health care crisis because they represent a fair, fiscally sound and tested approach," Sen. Olympia Snowe (R, Maine) said at a recent hearing of the Senate Small Business and Entrepreneurship Committee, which she chairs.

The House and Senate bills are almost identical to legislation passed by the House last year. The measures would allow association health plans to maintain uniform operations across the country, avoiding many state requirements, such as benefit mandates and community rating.

Not bound by such state requirements, AHPs would be able to offer lower premiums to many small businesses, according to a recent Congressional Budget Office analysis of the legislation. The plans would be regulated by rules set by the federal government and the state in which they are headquartered. The U.S. Dept. of Labor would be responsible for overseeing the new entities.

Snowe, who introduced the Senate bill, said she hoped that Congress would be able to pass legislation this year that will help small businesses and the uninsured afford health coverage. AHP legislation could do that at nominal cost, she said.

The CBO estimated that if enacted, AHPs would cost the Labor Dept. about $4 million next year to regulate and $55 million over the next five years. Because coverage bought through AHPs would qualify for the same tax breaks as employer-based insurance, the legislation also would result in the federal government losing about $3 million in revenue next year, the CBO predicted.

That low cost means there is little or no downside to trying this approach, said Sen. Jim Talent (R, Mo.) at the hearing. "If people don't want it, they won't buy it," he added.

But it may not be that simple, said Kris Haltmeyer, director of policy analysis at the BlueCross BlueShield Assn., which is part of a national coalition opposing AHP legislation.

Some economists believe that federally regulated AHPs would attract mostly small businesses with healthy employees. This could segment the current insurance market and lead to higher premiums for small firms with sicker workers, Haltmeyer argued.

The plans likely would cause only a small decrease in the number of uninsured Americans, the CBO said.

Its analysis shows that if the legislation passes, 8.5 million people would purchase coverage through AHPs, but only 620,000 of them would have been previously uninsured.

"That's very little bang for the buck," Haltmeyer said.

The CBO's estimate of the number of uninsured who would gain coverage through the new plans is relatively optimistic, Haltmeyer said. A study by the Urban Institute suggests that there would be no change in the number of uninsured because of AHPs, and a study by the international consulting firm Mercer concluded that the number actually could increase.

Some senators are also skeptical of AHPs' potential impact.

"We have a lot of evidence that association heath plans don't live up to their promise," said Sen. John Kerry (D, Mass.).

AHP proponents, such as the U.S. Chamber of Commerce, argue that those estimates are based on flawed assumptions, such as the ability of these plans to "cherry-pick" healthy patients despite restrictions written into the bill. They also don't take into account increased competition created by the plans.

Factoring in heightened competition and rules against cherry-picking produces estimates that 2.1 million to 8.5 million currently uninsured Americans would purchase coverage through AHPs, according to a study by the CONSAD Research Corp., an economic and policy analysis firm.