Health Care and Insurance and Government and Small Business

Law lets small employers band together for insurance: Experts disagree on whether associations will take off

May 28, 2007

The Healthy Indiana Plan, which enacts a system to bring affordable health insurance to low-income Hoosiers, is one of the most far-reaching pieces of legislation to arise from the General Assembly this spring.

The noble cause could provide coverage to about 15 percent of the state's population. Yet it could affect the small-business community as much as the state's growing number of uninsured.

House Bill 1678, introduced by State Rep. Charlie Brown, D-Gary, and signed by Gov. Mitch Daniels May 10, enables certain small employers to band together to purchase group health insurance.

State agencies estimate that about 870,000 Hoosiers-or 14 percent of the state's population-lack health insurance, up from about 9 percent in 2000.

"I personally believe that health care is a right and not a privilege," said Brown, who once floated legislation providing universal health care to all Hoosiers. "The endeavor here is to get as many people covered as humanly possible in the state of Indiana."

The appeal of association health plans is that they allow companies to pool their health care dollars to gain bargaining power. For example, a pizza shop owner who employs five people might join with other independent restaurateurs to get a better deal than each business could on its own.

The practice mirrors what has been attempted several times at the federal level to no avail. The Bush administration has long touted AHPs as a way to lower health insurance costs for the nation's small businesses. The measures traditionally clear the House but stall in the Senate without a vote.

The problem from the perspective of health insurance providers and consumer groups is that the plans would have a national reach and, therefore, be exempt from state regulation.

Early versions of the legislation put the federal government in charge of the plans. Critics, such as Democratic Sen. Evan Bayh from Indiana, worried that Uncle Sam did not have the resources to oversee such a plan. Another concern is that the federal government doesn't have as many consumer-protection laws on the books as individual states do.

But a federal bill introduced in late 2005 seemed to have addressed the concerns. States would oversee the plans, which would be required to abide by common health care mandates.

Some states require benefits such as cancer screenings and mental health parity, for example, but others do not. Opponents have argued that cost-conscious executives would establish the plans in the states with the fewest required benefits.

The provisions did little to quell concerns, though. The bill finally got a vote in the Senate last year but failed.

Insurers on board?

It's unclear at this point whether the proposal approved by Indiana lawmakers would allow insurers to provide policies without complying with all the state's 17 health-benefits mandates, such as coverage for autism testing.

Guidelines likely won't be ironed out until early next year, said Carol Cutter, deputy commissioner of the Indiana Department of Insurance. Other portions of the legislation, mainly the "Indiana Check-Up" plan, will take precedence with the department and the Family Social Services Administration. The bill gives the two agencies authority to craft the programs.

"Indiana Check Up," funded in part by the 44.5-cent cigarette tax increase, also expands health coverage to more than 130,000 low-income uninsured people and increases the number of children and pregnant women eligible for state-sponsored health insurance.

When the time comes to tackle AHPs, Cutter hopes to have insurance providers at the table.

"We have the ability to allow small employers to do this, but that doesn't mean the insurance companies are going to accommodate that, necessarily," she said. "We would hope to have them as part of the conversation since, ultimately, they will be the ones underwriting the plans and creating eligibility guidelines."

That might be wishful thinking, judging by the comments of Tony Felts, spokesman for Anthem Blue Cross and Blue Shield of Indiana, a division of Indianapolis-based WellPoint Inc., the largest insurance provider in the country.

"Not knowing what the framework might look like," he said, "it's too soon to comment at this point."

The insurer's chief concern with purchasing pools is that they rarely achieve the desired outcome of reducing premiums, Felts said. They attract companies with the least healthy employees and drive out employers with healthy workers that realize they can find insurance on their own and don't need the pool, Felts said.

More choices called for

Conversely, the National Federation of Independent Business, a Washington, D.C.-based small-business advocacy group, supports AHPs, said Kevin Hughes, Indiana director for the NFIB.

"The availability and affordability of health insurance is the No. 1 concern for our members and has been for 20-plus years," he said. "It's premature for us to say it would have a huge impact, but nonetheless, it's one more tool for business owners to have."

The NFIB opposes all state mandates for health care and ultimately wants small businesses to be on the same level as national corporations and unions. Their health plans are free of mandates because they fall under the federal Employee Retirement Income Security Act.

"We really only have one choice, and that's the Cadillac policy," Hughes said. "We would like the Chevrolet policy, or at least that option."

Various forms of group health plans have been in existence for several years. The Greater Indianapolis Chamber of Commerce is a pioneer of sorts in offering alternatives to traditional coverage. The organization unveiled a group health plan 18 years ago that now has nearly 2,000 participants enrolled.

The small-group policy is a normal Anthem product and is discounted 5 percent to members, Chamber President Roland Dorson said.

Whether private or public sector initiatives are the best option remains to be seen. Despite several attempts, Dorson said, costs as well as the number of uninsured continue to escalate.

Indeed, nearly 45 million Americans lack coverage. And more than half of them are employed or dependent on someone who works for a small business, according to the NFIB.
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