Small Firms Pushing to Level Health Coverage Playing Field

One of the ongoing beefs of both small-business owners and the people who work for them is the difficulty of obtaining--and paying for--health insurance.

While big companies routinely offer this important benefit to workers, small firms all too often find that they are unable to afford it, and in some cases that it is unavailable at any cost.

Easing this crunch is at the top of the legislative agendas of small-business groups for the new Congress. However, since there is no easy solution to the problem, there isn’t full agreement on what should be done.

One step that some groups are backing is a change in federal law to permit “association health plans.” These would be health plans operated by trade groups or professional associations for their members. One of their advantages is that they would allow small businesses to, in effect, band together to enhance their purchasing power and realize economies of scale.

But more important--and this is where legislation is needed--these plans would be exempt from state regulation, just as self-insured health plans of large employers typically are, thanks to the Employee Retirement Income Security Act.

Such an exemption not only would allow association plans to operate across state lines, it would free them from state “mandates”--requirements that various conditions and treatments be covered--and other layers of regulation that run up costs, backers say.

For small businesses, such plans “would lower their health-care costs, increase their choice, and level the playing field,” said John Emling of the Washington-based National Federation of Independent Business.

A business that belonged to a federation or some other trade organization that offered an association plan could turn to it for health coverage if it couldn’t find what it wanted in the state market.

The association “would operate as the human resources department” of the business, Emling said.

The federation figures “we can save a small-business owner 30% in administrative costs and as high as 13% in premiums,” he said.

“This is the solution we favor, coupled with expanded medical savings accounts and full deductibility [of medical insurance premiums] for the self-employed,” Emling said.

Backers are optimistic. The House has passed association health plan legislation four times in the past, and President Bush endorsed the idea during the presidential campaign.

However, some small-business groups have reservations.

“We see both good and bad” in the idea, said Todd McCracken of National Small Business United.

Association plans would address some of the current inequity between large and small firms in the market, and would ease the regulatory burden, McCracken said, noting that his group isn’t pushing the idea but is not opposing it, either.

The concern is that the association plans might not meet individual small firms’ needs much better than what’s out there now. “Different associations are going to design different plans at different prices. It could make shopping for insurance more complex” than it already is, he said.

McCracken’s group would like to see health-insurance policy shifted toward individuals and away from the current employer-based system. But he agreed that with another surge in premiums looming, something needs to be done in the short term.