U.S. Senate Considers Small Business Health Plans

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Small Business Affordable Health Insurance

Since 2003, the Robert Wood Johnson Foundation and other groups have sponsored an annual campaign during the first week of May to "Cover the Uninsured." As a result, Congress often considers health legislation during the month. During this year's "Health Week," advocates hoped the Senate would break a longstanding impasse on affordable health insurance for small businesses.

Sen. Michael Enzi (R-WY) and Sen. Ben Nelson (D-NE), a former state insurance commissioner, are sponsoring S. 1955, the Health Insurance Marketplace Modernization and Affordability Act of 2005. Helping small businesses afford health insurance is more than just an assignment for Enzi, chairman of the Health, Education, Labor, and Pensions Committee. In the private sector, Enzi once owned a shoe store and struggled to provide health coverage to his employees and their families.

"Over time, coverage became too expensive," Enzi reported at a committee hearing, "and I was forced to stop offering insurance. Instead, we gave employees cash toward insurance. My own family turned to the individual market for coverage."

Affordable Health Insurance Options

Enzi's bill would allow small businesses to purchase health insurance through trade associations such as the U.S. Chamber of Commerce or other nonprofit groups. Unlike the Association Health Plan (AHP) legislation the House passed last July, S. 1955--which creates "Small Business Health Plans"--does not allow the associations to self-insure. Instead, coverage must be purchased through existing insurance companies. This change has gone a long way toward neutralizing the insurance industry's opposition--a critical factor in moving Enzi's bill forward.

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A study released in March by the actuarial firm Mercer Oliver Wyman found that if S. 1955 is fully implemented, it will newly insure 1 million working Americans, or about 8 percent of the nation's working uninsured. Premiums for employers could be reduced by as much as 12 percent - about $1,000 per employee.

In addition to allowing associations to pool together and negotiate on their members' behalf, S.1955 takes on the morass of existing state mandates. Currently, each state regulates which benefits insurance carriers must provide in any policy offered in that state. Some states, such as Idaho and Wyoming, require seven or eight mandates. But others, such as Connecticut and Maryland, have 30 or more mandates. According to a study released earlier this year by the Council for Affordable Health Insurance, such mandates have increased the cost of health insurance by as much as 45 percent in some markets.

'Cadillac' Coverage

S. 1955 would preempt state insurance mandates by allowing insurers to offer basic coverage that does not necessarily contain all the mandates of any given state, for small businesses, individuals, and small groups. In addition to a "no-frills" insurance plan, Enzi's bill would require carriers to provide a second policy option that incorporates all the benefits found in a plan offered to state employees in any of the five most populous states (California, Florida, Illinois, New York, and Texas).

This means "small employers can select a high-option Cadillac style plan, plus have lower-cost alternatives available," said Joseph Rossman, vice president of Associated Builders and Contractors, a supporter of the bill who appeared at an April 24 briefing on small business health plans sponsored by the Alliance for Health Reform.

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