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Association Health Plans: Not So Simple

Glenn Cornett, president of a six-person real estate office in Mebane, N.C., pays about $900 a month for private health insurance, which covers himself and his wife.

“And that’s for bare-minimum coverage with a $1,000 deductible,” he says. Based solely on cost, Cornett says about half of the real estate agents in his office go uninsured each year.

Cornett would like real estate agents across the country to be able to bargain as a group for better rates with health insurance companies, something that members of labor unions and employees of large corporations are already allowed to do.

The answer to Cornett’s wishes could come from the Small Business Health Fairness Act of 2005, which is expected to receive a vote in the House before the August recess. If it ultimately becomes law, Cornett and others would be able to purchase an “association health plan” through national trade groups.

For years, AHPs have been floated as a health policy solution in Washington. The policy proposal has received attention in the capital because it is touted by a number of trade associations that are influential with Congressional Republicans, including the National Federation of Independent Business, the National Association of Wholesaler-Distributors, the National Association of Realtors and the U.S. Chamber of Commerce.

Such groups not only favor the policy on its own merits but could also stand to benefit financially, because AHPs could be a tool for attracting new members.

But turning a policy idea into law is never easy, and AHPs have run into opposition from other players in the health sector, ranging from insurance carriers such as Blue Cross and Blue Shield to patient-advocacy groups and state-government organizations.

With such high stakes, the two sides have undertaken massive coordination efforts, begun beating the war drums and run nearly every plan in the lobbying playbook.

“When the bill was first written, it was seven pages,” said Katie Strong, a lobbyist for the U.S. Chamber of Commerce. “Ten years later, it’s about 40 pages.”

Proponents say the concept is simple enough: Create massive national insurance pools that dilute the risk for insurance providers, thereby lowering premiums for customers. Doing this could put a 20 percent dent in the more than 40 million uninsured Americans without withdrawing a dime from federal coffers, advocates say.

Even detractors agree that the principle behind AHPs is enticing.

“The hard part is that the other side has a very simple message, even though it is wrong,” said Jack Ericksen, vice president of federal relations with the Blue Cross and Blue Shield Association, the lobbying wing of the federated insurance group, which staunchly opposes AHPs.

Strong’s organization is part of a coalition supporting AHP legislation, comprising the National Association of Manufacturers, the National Association of Realtors, the American Consulting Engineers Council and more than 200 other organizations representing small-business and independent-contractor types.

According to the group, steep premium hikes in recent years have forced many small businesses to drop employer-sponsored insurance coverage altogether, and this trend is expected to continue.

More than 60 percent of the nation’s uninsured either work for or are family members of an employee of a small business, the group says.

For small firms, “the biggest single driver in their business is health care — double digit increases every year,” said Dirk Van Dongen, president of the National Association of Wholesaler-Distributors. Small businesses are “faced with the Hobbesian choice of cutting benefits, requiring the employees to pay a higher share or having higher deductibles.”

To push their agenda, pro-AHP groups have leaned on perhaps their most valuable asset: their members.

“We don’t have the big money the insurers have, so we’re going to let the people speak,” said Amanda Austin, a lobbyist for the NFIB.

AHP legislation is “one of the primary issues” for the National Association of Realtors, according to Steve Cook, vice president of public affairs for the association. Of its 1.2 million members, 25 percent are uninsured.

In the past two years, Realtors have bombarded Senators with about 140,000 letters and sent nearly 15,000 members to Washington, D.C. Also, the group has spent $1.2 million on print and radio ads promoting AHPs.

Holding up the legislation, according to some major AHP supporters, is a major counter-effort by insurance companies and states to protect their interests in the small-business insurance market.

In contrast to writing policies for large companies, “insurance companies sell risk-based insurance on more favorable terms to smaller groups — that is, favorable to the insurance companies,” said Curt Morrison, a health care analyst with the financial research firm Morningstar, which is not involved in the lobbying battle.

If national AHPs are allowed, niche insurance providers could be affected, Morrison said. “If it’s a national organization, they’ll be more attracted to a larger player and less inclined to go after a local Blue Cross and Blue Shield provider.”

Those in the insurance trenches agree. “The ones that have the most to lose are the Blue Cross and Blue Shield plans — they’re local franchises,” said Alan Leafman, president of Worldwide Insurance Services Inc., an independent insurance agency in Northbrook, Ill.

“The other major stakeholders are the states because of [insurance] premium taxes,” Leafman said. Mississippi, for example, has a 3 percent levy on all health insurance policies sold in the state.

The National Governors Association has questioned just how solvent these national schemes would be and how AHP legislation would shift oversight from the state level, where insurance regulation is well established, to the Labor Department, which may not have the manpower to root out malfeasance.

“Primarily, what AHPs do is exempt huge populations from state consumer protections and other regulations,” said Matt Salo, director of the health and human services committee at the National Governors Association. The proposed legislation includes “solvency standards, but if there is no one there to enforce them, how useful are they?” Salo asked.

The insurance industry maintains that the proposed legislation will create an unequal playing field by creating new breeds of insurance carriers that are not required to adhere to state insurance requirements and mandates.

And those in the insurance industry are not shy about admitting what they imagine will happen if the legislation passes.

AHPs “would destroy the market that most small businesses depend on for [insurance] coverage,” Ericksen said. In its place, according to Ericksen, a less-than-desirable insurance culture will emerge. “Predators would come out of the woodwork if this becomes law,” he said.

Other groups in opposition are focused on a few specific issues that could allow AHPs to potentially skirt specific state laws.

“It would be very bad for the health of people with diabetes,” said Hunter Limbaugh, chairman of government affairs and advocacy for the American Diabetes Association.

For the Diabetes Association, a major sticking point is adherence to state mandates requiring health plans to cover diabetes-related treatments and supplies.

“This is quite a big priority because the legislation would exempt AHPs from complying with existing laws in 46 states and D.C.,” possibly making it difficult for patients to receive “the necessary supplies and education diabetics need to manage their disease,” Limbaugh said.

For the National Partnership for Women and Families, one issue is the potential for AHPs to discriminate on the basis of age, race or gender, according to Debra Ness, president of the group.

Moreover, the importance of the health care system to the group’s members is paramount, Ness said.

“Women are the primary users of health care, the primary decision makers and the primary health care givers for their families,” she added.

In addition to the muscular lineup of trade associations who back AHPs, President Bush has spoken in favor of the idea. And many Republican lawmakers are enticed by the prospect of easing the problem of uninsured Americans through private-sector means.

But despite this formidable alliance of supporters, the diverse coalition arrayed against AHPs has so far prevailed.

The current AHP legislation is the sixth incarnation of the concept in as many sessions of Congress. And, as sure as fireworks in July, the House again is expected to pass the bill, while the measure’s fate in the Senate could be anyone’s guess, even though the Republicans have picked up four Senate seats since the last vote on the issue.

“Regardless of what happens in the House, the devil lies in that other crazy body,” said one industry source.

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