Association Health Plans: A Disastrous Scheme for Small Business

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Association Health Plans

Opinion piece by Ron King, Chairman, CEO and President, Blue Cross and Blue Shield of Oklahoma

Congress once again is considering President Bush's proposal for Association Health Plans (AHPs). The president is promoting this legislation as a way to make health insurance more affordable for small businesses. Unfortunately, AHPs will not solve the problem, but instead make matters worse. Legislation to allow Association Health Plans would create unregulated insurance companies exempt from state laws designed to protect consumers, doctors and hospitals.

Federal AHPs would eliminate state consumer protections currently in place across the country, including provisions that shield consumers from unlimited rate increases and guarantee an external review for any denied claims.

We've learned from history. In the 1980s and 1990s, an epidemic of health insurance fraud swept the country, including Oklahoma. Health plans called Multiple Employer Welfare Arrangements (MEWAs) were created to help small businesses afford health insurance. Yet in practice, lack of state protections left many small businesses and their employees vulnerable to these unmanaged and under-funded health plans. Hundreds of consumers went without health care when they needed it most, and physicians, hospitals and other health care providers were left without compensation. This was particularly difficult for patients involved in a course of treatment. In 1983, Congress tried to address its failed policies with federal legislation that returned regulatory oversight of MEWAs to the states.


The non-partisan Congress-ional Budget Office estimates that 75 percent of small employers and their employees (23 million people) would face rate increases.

A recent nationwide study by the Mercer financial consulting firm further indicates that the number of uninsured would increase by one million and health insurance premiums for small employers that continued to purchase state-regulated coverage would increase by 23 percent.

States have enacted laws to ensure that health insurance plans offered to small business employees and their families are dependable and adequately priced (utilizing actuarial rate development), and that they pay claims in a timely manner. Small employers who join AHPs would rely on the U.S. Department of Labor (DOL) for oversight. Given its current resources and anticipated workload under AHP legislation, the DOL recently testified that it would be able to review each health plan only once every 300 years.

Special exemptions for AHPs would result in the loss of coverage for specific benefits currently required by state law. Individual states have enacted laws that require insurance companies to cover certain medical procedures and treatments. Federal AHPs would be exempt from covering these benefits, including mammography screenings, diabetic supplies, prenatal care and well-child care.

Blue Cross and Blue Shield Plans across the country are committed to making health care coverage as affordable as possible. But Association Health Plans are not the answer. For more information, visit