On February 5, the Senate Small Business Committee held a hearing to examine the growing problem of providing affordable health care for small businesses. The committee explored initiatives to expand health care coverage by small businesses, focusing on the President’s proposal for Association Health Plans (AHPs) as a solution. Under AHPs, small businesses can join together through an association to purchase or provide health insurance for their employees.
Committee Chair Olympia Snowe (R-ME) opened the hearing, saying that “more than 60 percent of the 41 million uninsured are working full-time in a small business.” She noted that, “According to a Kaiser survey, only 61 percent of small businesses offer health benefits to their employees, down from 67 percent three years ago.” She added that it is not because small businesses don’t want to provide health benefits, it is because “the cost of health insurance has skyrocketed to the point of being prohibitive.” Additionally, Sen. Snowe explained that she would be introducing legislation to enhance AHPs.
Ranking Member John Kerry (D-MA) responded. “The challenge we have before us is to develop more effective pooling mechanisms that can give small businesses more leverage in the health insurance market while still preserving essential consumer protections,” he said.
Secretary of Labor Elaine Chao told the committee that her agency, which oversees the regulation and certification of group health plans, has had firsthand experience with AHPs, and she highlighted their benefits. “By grouping small employers together to purchase coverage, AHPs will be able to act more like large employers and offer lower cost coverage to employers, employees and their families,” she said. According to the Congressional Budget Office (CBO), employers would save anywhere from 9 to 25 percent on their premiums under AHPs, she explained. “AHPs would help ensure that small employers will not be denied coverage or priced out of the market due to the health of their employees,” she added.
Hector Barreto of the Small Business Administration explained the need for legislation. “Under current law, those who choose to pool their resources must cope with the requirements of up to 50 different state insurance regulators and state mandates that can often prove to be very costly to the point of where forming AHPs is almost always cost-prohibitive,” he said. Once Congress passes legislation, SBA will seek to connect small business owners with the best solutions for providing health insurance to their employees, while the Department of Labor will implement the necessary programmatic structure,” he added.
According to Judith Lichtman of the National Partnership for Women and Families, women are particularly impacted by the health coverage crisis facing small businesses, “both as small business owners and as their workers and dependents.” She explained that women-owned businesses are mostly small firms and that “women are disproportionately likely to work in low-wage jobs, which are often in smaller firms, or in part-time jobs, or jobs in the retail and service sector where health coverage is rarely offered.” She stated that “women are not only more likely to use health care services than men, but they also need access to benefits that are more expensive during their prime working and childbearing years.” She added, “Legislation that ensures high quality affordable coverage is urgently needed.”
Ms. Lichtman expressed concerns about AHP legislation, specifically the AHP provisions in the patients’ bill of rights (H.R. 2563) that passed the House during the 107th Congress. She noted that proposals in the legislation would “give AHPs several new ways to attract only the healthiest individuals into the plan, leaving the more expensive unhealthy individuals for other insurers to cover.” She also pointed out that the House-passed legislation exempted AHPs from state oversight and regulation, and that “in place of very specific and stringent state regulation, AHP legislation would establish only nominal and inadequate federal standards and oversight under the DoL.”
Cliff Shannon of SMC Business Councils in Pittsburgh also expressed concern about AHPs. “The worst case scenario is not no action; it is new federal action that increases expenses,” he said. “All of these changes only pile more and more costs on a private system already tottering under the weight of its current load,” he added.
Terry Neese of Women Impacting Public Policy (WIPP) disagreed. “Women business owners number 6.2 million and employ 9.2 million according to the Center for Women’s Business Research,” she pointed out, and added that WIPP “would like to be able to offer AHPs as a benefit to our members.”
Ms. Neese told the committee that WIPP “proposes and supports AHPs.” She contended that, “AHPs have the potential to lower insurance premiums for small firms by freeing employers from direct and indirect state taxation, some mandated benefits, and the cost of compliance with multiple state regulations.” She also contended that AHPs would create jobs, saying, “with the potential lowering of premium costs to the business owner, the possibility of using those costs savings to create one job in every small business would be huge.”
