Masonry Magazine October 2002 Page. 12
Government Update
A Prescription for Coverage:
Association Health Plans
Christopher "Kit" Bond
Senator from Missouri
With great fanfare last June, the Senate passed a Patients' Bill of Rights package. Unfortunately, it offers no help to the millions of employed but uninsured individuals who earn their living through a small business like the St. Charles, Mo, travel agent who recently contacted me, worried about the cost, quality, and availability of health insurance.
His premiums are now running almost $1,000 a month for his family policy. Only three years ago, he was paying about $500 a month and was getting more extensive coverage. That amounts to a 100 percent increase. Even more troubling is the fact that he has been advised to expect up to a 25 percent increase next year.
My office has been flooded with similar calls that illustrate the dire need of small firms to obtain health insurance that is competitively priced and of comparable quality to the plans big businesses routinely offer their employees. Without a doubt, there is a need to bring Fortune 500 health benefits to the nation's Main Street small businesses and their employees.
Ironically, as many as 24 million individuals, or 60 percent of the 40 million uninsured Americans, are employed. That figure is shocking. Moreover, many of these employed but uninsured individuals work for small businesses that would like to provide health insurance. Some in this group used to provide coverage but have been forced to eliminate health benefits in recent years due to skyrocketing costs.
Unfortunately, the Missouri travel agent's dilemma is far from unique. The General Accounting Office recently reported that while small and large employers pay similar premiums, small employers receive less value for their money for several reasons. Small employers generally purchase coverage with higher cost-sharing requirements for their employees compared to large employers. Also, small employers tended to receive slightly fewer covered benefits for the same premiums paid by large employers.
When small businesses go out to buy health insurance alone, they are at a clear disadvantage. Why? Because they have insufficient buying power to negotiate affordable rates and generous benefit packages. The bottom line: It simply costs more to insure small businesses since they have fewer employees who can subsidize the costs incurred by the policyholders. Insurers understand that small firms represent the worst ratio of risk to revenue and limit the policy options available as a consequence. Ultimately, small firms hoping to provide health benefits are at the mercy of insurance companies.
The only solution is to help the employed but uninsured by allowing small businesses across the country to pool together and access health insurance through their membership with a bona fide trade or professional organization. In this way, employees of small businesses can enjoy the same opportunities as other large insurance purchasers. Such Association Health Plans (AHPs) would provide greater economies of scale to spread costs and risk, increase group bargaining power with large insurance companies and It simply costs more to insure small businesses since they have fewer employees who can subsidize the costs incurred by the policyholders.
reduce administrative costs for all members. However, a change in federal law is needed to allow these plans to operate on a nationwide basis.
At the Department of Labor's "Women Entrepreneurship in the 21st Century Conference" in March 2002, I asked over 1,200 women business owners. If the government could enhance their bargaining power, boost administrative efficiencies, expand choice, and reduce costs in the health insurance market would these changes affect their decisions about offering health benefits to employees and their families? A resounding 96 percent said it would.
When President George Bush later spoke at the conference, he made clear his strong support for AHPs, saying: "It makes no sense in America to isolate small businesses as little health care islands unto themselves. We must have association health plans. [These] will allow association groups to write health care plans across jurisdictional boundaries to the benefit not only of the small business owner, but to the benefit of those who work for small businesses."
Although AHPs provide the best hope for injecting competition into the insurance market, there are some who oppose this approach. For example, large insurance companies have a virtual monopoly on health care in most states.
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