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Association health plan bill touted as aid to uninsured

Opponents argue that deregulating AHPs could leave patients with inadequate coverage.

By Joel B. Finkelstein, amednews staff. Feb. 24, 2003.

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Washington -- Legislation to federally regulate association health plans would undermine important state protections, such as physician prompt-pay laws and health plan external appeal requirements, several policy experts have warned.

Association health plans are currently regulated by state laws, making it difficult for them to operate across state lines. The legislation, which was introduced on Feb. 11, would shift oversight to the Dept. of Labor and subject AHPs to the Employee Retirement Income Security Act of 1974.

However, many states have much tougher insurance laws than ERISA and are better regulators of health plans than the federal government, some analysts said. Opponents of the bills argue that removing state oversight will leave many patients with inadequate coverage.

The small-business community has rallied around AHP legislation as a method for more employers to offer health insurance to their workers by giving them buying power similar to that of large companies.

"Association health plans will allow small business owners to band together across state lines ... to purchase health care for their families and employees," said National Federation of Independent Business President Jack Faris, during a recent Senate Committee on Small Business and Entrepreneurship hearing.

Sen. Olympia J. Snowe (R, Maine), chair of that committee, said that the bill would also help the uninsured -- close to two-thirds of whom work for small businesses or are self-employed.

A report from the Congressional Budget Office estimated that AHPs could cover as many as 4.6 million Americans, but only about 330,000 of them would be people who did not already have health insurance.

More covered, less coverage

Public policy experts warn that exempting AHPs from state laws is risky business for small employers and state-regulated insurers alike.

"A bunch of small employers does not make a large employer," said Karen Pollitz, project director at the Institute for Health Care Research and Policy at Georgetown University in Washington, D.C.

The CBO's analysis suggested that savings from national association health plans would be small, on the order of 5%, and would be derived mainly by limiting benefits.

Opponents say a powerful draw of deregulating AHPs is the potential to offer bare-bones insurance packages, thereby making it affordable for small businesses to offer their workers some coverage, however minimal.

Insurers, such as Blue Cross and Blue Shield plans, fear that associations' stripped-down health plans would segment local risk pools, placing an unfair burden on state-regulated plans. While attractive to employers with relatively healthy workers, AHPs would not offer coverage to satisfy companies with older or sicker employees. These companies would stay in state-regulated health plans, destabilizing the market, the BlueCross BlueShield Assn. argues.

The insurance group released a state-by-state analysis showing which consumer protections and benefit mandates would be lost as the result of AHP legislation. Forty-nine states have prompt-payment rules, 47 states have laws preventing "gag rules" against physicians, 42 require plans to cover emergency services that a "prudent layperson" would consider necessary, 41 mandate direct access to ob-gyns, and 37 require plans to cover transitional care from a practitioner who leaves a network.

Most states also require coverage for mammography, alcoholism treatment and well-child care.

Avoiding mistakes of the past

Association health plans raise the memory of problems with multiple-employer welfare arrangements during the 1970s. These national plans popped up after passage of ERISA, which initially allowed them to operate outside state laws.

The arrangements were rife with fraud and bankruptcies, and Congress quickly responded by revising the ERISA regulation to exclude these health plans and bring them back under state purview.

According to Snowe and others, new legislation would avoid these problems. Only established associations, not those formed solely for the purpose of offering insurance, could start AHPs. Associations would also be required to secure coverage with sufficient reserve funds. And Snowe has assurances that the Bush administration would allocate the necessary resources to the Dept. of Labor to keep AHPs in line.

The National Governors' Assn. said those measures are not enough.

"In just the last six months, media reports have documented failures of multiple-employer welfare arrangements -- including some sponsored by associations -- that have left over 100,000 consumers with unpaid claims," the NGA stated in a letter to Snowe. "AHP legislation would exacerbate these problems by replacing state oversight with minimum certification by the U.S. Dept. of Labor, which has no capacity for regulating insurance arrangements."

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