The Small Business Health Fairness Act of 2004 amends the Employee Retirement Income Security Act of 1974 (ERISA) to provide for the establishment of Association Healthcare Plans (AHPs), which are group health plans sponsored by trade, industry, professional, chamber of commerce or similar business associations. Under this model, small employers and the self-employed join together to increase their purchasing power to get a better deal in the health insurance marketplace. However, the bill exempts Association Healthcare Plans from state insurance regulations and consumer protections.
The Middle-Class Position:
The Middle Class Opposes: Enhancing the ability of small businesses to offer quality health insurance would go a long way towards reducing the number of uninsured Americans. But the devil is in the details: by exempting AHPs from state regulations, this bill increases average health care costs for small businesses and reduces the number of workers with health insurance. For example, state laws prevent insurance plans from cherry-picking only the healthiest people for insurance coverage, allowing businesses with relatively healthy employees to join for less money, while charging higher rates to those with older and sicker workers. This would destabilize the health care marketplace: state-regulated health care plans would see their healthy workers siphoned off to the AHPs, leaving them with a disproportionate number of older and sicker employees who are more expensive to cover. Health care premiums for all small businesses except those with the healthiest workforce would soar, and companies unable to cope with the increased costs would leave their employees at risk of becoming uninsured. For this reason, the Congressional Budget Office has projected that AHP legislation, if enacted, would result in higher premiums for four out of five small employers.
From the Experts:
“AHP legislation would likely increase premiums for small employers and their workers, and make it much harder, if not impossible, for small business owners with older, sicker workers to get access to affordable health coverage. We need a better solution for small businesses. This is not the answer.”—Todd McCracken, president, National Small Business Association (February 22, 2005)
“The American Nurses Association opposes HR 4281 because it would pre-empt protections provided by state insurance laws and regulations. These important protections guarantee a minimal level of coverage. They insure that plans cover services such as maternity care, mental health care services, and home health care.”—Rose Gonzalez, Government Affairs Director, The American Nurses Association (May 11, 2004)
“A risky and precedent-setting preemption of state law, the proposed House legislation (HR 4281)… would seriously undermine states’ ability to provide their citizens with access to affordable health insurance coverage by exempting AHPs from important state regulations. The legislation would raise already skyrocketing health care premiums on our most vulnerable populations while watering down states’ existing financial oversight and consumer protection measures.” —The National Governor’s Association (May 11, 2004)
Beyond this Bill:
Despite the profusion of research indicating that Association Health Plans exempted from state laws would have negative effects on the healthcare marketplace, driving up premiums and reducing the number of insured people, another new bill (HR 525) calling for AHPs has already been introduced. Legislators who are concerned with the struggles of the middle class to afford health insurance and with the struggle of small businesses to responsibly provide health insurance to their employees, should insist that AHPs be subjected to all relevant state insurance laws.
Number of middle-class households that lack health insurance: 1 in 6
Percentage of small businesses that did not offer health insurance to employees in 2004: 37
Proportion of small businesses that would see their premiums increase under this legislation: 4 out of 5
Predicted increase in the number of uninsured Americans under this legislation: 250,000 to 1 million
Average estimated increase in health care premiums for small business under this legislation: 6%
Average estimated increase in health care premiums for small employers with state-regulated coverage under this legislation: 23%
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