Association health plans to the rescue

In order to lower the rapidly increasing number of Americans without health insurance The President is promoting the Small Business Health Fairness Act. According to this bill, groups of small businesses will be able form insurance purchasing associations in order to improve their bargaining power. Presently entrepreneurs with few employees pay a much larger amount per policy than larger businesses. Administration costs are partly responsible for the higher prices. An estimated 20-35 percent of every dollar small employers spend on health insurance premiums are eaten up by administration costs. By purchasing policies through a large association, small businesses will be able to enjoy the same purchasing power that larger employers do.

Lack of consumer protection

Large companies that have long enjoyed an employee retention advantage over smaller businesses aren’t terribly excited about the Health Fairness Act, but they aren’t the only opponents. Critics of Association Health Plans fear a lack of consumer protections citing past failures of Multiple Employer Welfare Arrangements to provide adequate coverage. MEWA’s had relaxed licensing requirements, requiring low cash surpluses that often resulted in lack of coverage and unpaid medical bills.

Proof that it can work

Luckily, some associations have shown how group-purchasing pools can be effective. The Associated Builders and Contractors successfully operated an association health insurance plan for nearly forty-five years. The association claims that administrative costs were significantly lower than if individuals had purchased insurance themselves. Unfortunately, inconsistent state laws and mandates forced them to terminate coverage in 2002, leaving thousands of builders and contractors without affordable health insurance.

The real reason insurance is so expensive

State legislators have passed over 1500 laws and mandates that have sent insurance rates skyrocketing in recent years. Although politicians supporting the Small Business Health Fairness Act publicize the group purchasing benefits of Associated Health Plans, they are reluctant to mention the bill’s main cost reduction strategy. The bill also would allow associations to defy state mandates. For example, AHPs won’t require employers to include coverage for the medical equipment required to treat diabetes and other diseases. In fact, associations won’t have to cover most of the services and equipment currently required by state law.

Expanded association health plans

Another feature of the Health Fairness Act also allows expanded AHPs for non-professional groups like civic organizations and religious groups. The expanded health care plans would give consumers more options yet maintain low administration costs.

Suppose you attend several organizations. You belong to a Church Organization, the Single Working Mother’s Organization of Illinois and you are an employee of a small architectural firm that belongs to The Small Architectural Firms of America Organization. Assuming all three have formed an association capable of administering health insurance coverage, you would be able to select from three different health insurance plans.

Allowing consumers to purchase coverage through non-employer related associations has several other advantages. Employers would be less responsible for the health insurance needs of their employees allowing them to focus more on the success and expansion of their business. Consumers would be able to change jobs without a lag in coverage. Expanded association coverage also has more potential to satisfy individual needs. An athletic association might offer extensive coverage for sport related injuries. An association of chess players would most likely consider sport injury coverage unnecessary and pass that savings along to its members. The Health fairness act has the potential to help small businesses save money on employee benefits and greatly improve insurance options for consumers. Find out more at the NCPA and AHPs Now!

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