Legislation Would Allow Association Health Plans

Former President Ronald Reagan said that the “most terrifying words in the English language are: ‘I'm from the government and I'm here to help.'” His ideological progeny, the current occupant of the White House, seems to be operating under the same assumption as the race to create association health plans (AHPs) picks up speed. President George W. Bush appears to want to get state government off the backs of small employers who want to purchase health benefits for their employees.

Labor Secretary Elaine Chao and a bipartisan group of lawmakers introduced a bill on Feb. 11 that would permit AHPs, which would allow businesses with fewer than 200 employees to band together into purchasing consortiums. One of the ways they'll be able to do so is by skirting hundreds of state regulations and mandates.

Proponents say that this is one way of addressing the problem of the uninsured. Research by the Kaiser Family Foundation shows that as insurance premiums at small companies have risen more than 10 percent over the last three years, the percentage of small businesses offering health benefits dropped from 67 in 2000 to 61 last year.

That's a daunting problem, but AHPs are not the solution, critics of the proposal maintain.

“If this proposal becomes law,” says Donald Young, MD, president of the Health Insurance Association of America, “it could increase the risk of fraud in the marketplace, might leave consumers stuck with unpaid medical bills, and may create the need for an expensive, new federal regulatory structure that duplicates one already in place in the states. Moreover, we believe the administrative savings from these AHPs probably will prove less than many hope.”

The Bush administration and most — if not all — Republicans in Congress hope that's not the case, and they're pushing AHPs as part of overall health system reform. AHPs would allow small businesses to buy insurance for their employees through a business or professional association. By leveraging their numbers, employers could buy insurance at a more reasonable rate — opening the way to providing coverage for lower-paid workers, who often find themselves among the uninsured.

In addition, some associations would be able to get the sort of leverage with insurers that would allow them to obtain specialized offerings, according to the Chicago Tribune. “For example, the plan offered by the American Council of Engineers covers hearing aids and glasses for its members.”

Much of the ammunition against AHPs comes from a Congressional Budget Office report released in 2000. It says that companies that already buy insurance will migrate to AHPs, forcing up rates of those left in the traditional small-employer market. This, as the Tribune puts it, illustrates that the idea has “less-obvious side effects that can destabilize the insurance market, create financially unstable insurers, and result in fraudulent health coverage schemes.”

As Mark Pauly, professor of health care systems at the University of Pennsylvania's Wharton School of Business, tells the newspaper: “You can't construct a giant by having lots of midgets stand on each others' shoulders.” Still, as noted in the same article, he isn't totally against giving AHPs a try. “Nothing else has worked.”

MANAGED CARE March 2003. ©MediMedia USA