By Kerrie Jones Clark
Two of America's greatest health-care challenges, skyrocketing health costs and the swelling ranks of uninsured Americans, are closely tied.
Some in Washington mistakenly believe that proposed federal legislation to exempt Association Health Plans (AHPs) from state insurance oversight is just what the doctor ordered to address both of these challenges. The evidence is overwhelming, however, that AHPs are a textbook case of the proposed cure being worse than the disease.
Today, many business associations operate health plans for their members under state law.
In a misguided effort to reduce costs for small firms, proponents of a federal AHP exemption want to override state laws guaranteeing benefit requirements (i.e., prenatal care, mental-health services, cancer screenings), solvency standards, and consumer protections.
In theory, this would reduce health-coverage costs for AHPs and more small employers would provide coverage for their employees. In practice, however, the story is very different. Rather than improving health-care access for small firms, a federal AHP exemption would create a massive loophole for these plans to avoid important state reforms designed to make coverage affordable and accessible for all small firms.
In fact, a study by the Congressional Budget Office (CBO) found that 80 percent of workers in small firms - 20 million people - would see a premium increase under AHP legislation. The CBO concluded that any cost savings for the few remaining small business employees would come from AHPs "cherry-picking" those who are young and healthy from the traditional insurance market.
With AHPs able to leave behind older, less healthy people, the vast majority of individuals and small firms insured through traditional coverage would ultimately face increased costs.
Moreover, it is not only those who remain in the traditional insurance market who would suffer under a federal AHP exemption. A federal AHP exemption would place consumers at considerable risk for fraud and abuse. The failed experiment with Multiple Employer Welfare Arrangements (MEWA) is instructive.
In 1974, the Employee Retirement Security Act (ERISA) exempted MEWAs from state regulation and placed them under the regulatory authority of the Department of Labor. Many MEWAs marketed their plans to small businesses, and using the exemption avoided state regulation. This prevented state regulators from monitoring the activities of companies that became insolvent because of mismanaged and diverted plan assets.
Congressional hearings uncovered stories of individuals who lost their homes, their credit, and sometimes lifesaving treatment because their claims had not been paid by MEWAs that had failed. Ultimately, these exemptions were repealed, but similar abuses are likely if Congress decides to exempt AHPs from important state health-insurance regulations - higher costs, fraud and abuse, as well as unpaid medical bills.
A federal AHP exemption would be bad medicine for the very small businesses and consumers it purports to help. Congress should reject a federal AHP exemption.
Kerrie Jones Clark is executive director of the Rhode Island Health Center Association.
Two of America's greatest health-care challenges, skyrocketing health costs and the swelling ranks of uninsured Americans, are closely tied.
Some in Washington mistakenly believe that proposed federal legislation to exempt Association Health Plans (AHPs) from state insurance oversight is just what the doctor ordered to address both of these challenges. The evidence is overwhelming, however, that AHPs are a textbook case of the proposed cure being worse than the disease.
Today, many business associations operate health plans for their members under state law.
In a misguided effort to reduce costs for small firms, proponents of a federal AHP exemption want to override state laws guaranteeing benefit requirements (i.e., prenatal care, mental-health services, cancer screenings), solvency standards, and consumer protections.
In theory, this would reduce health-coverage costs for AHPs and more small employers would provide coverage for their employees. In practice, however, the story is very different. Rather than improving health-care access for small firms, a federal AHP exemption would create a massive loophole for these plans to avoid important state reforms designed to make coverage affordable and accessible for all small firms.
In fact, a study by the Congressional Budget Office (CBO) found that 80 percent of workers in small firms - 20 million people - would see a premium increase under AHP legislation. The CBO concluded that any cost savings for the few remaining small business employees would come from AHPs "cherry-picking" those who are young and healthy from the traditional insurance market.
With AHPs able to leave behind older, less healthy people, the vast majority of individuals and small firms insured through traditional coverage would ultimately face increased costs.
Moreover, it is not only those who remain in the traditional insurance market who would suffer under a federal AHP exemption. A federal AHP exemption would place consumers at considerable risk for fraud and abuse. The failed experiment with Multiple Employer Welfare Arrangements (MEWA) is instructive.
In 1974, the Employee Retirement Security Act (ERISA) exempted MEWAs from state regulation and placed them under the regulatory authority of the Department of Labor. Many MEWAs marketed their plans to small businesses, and using the exemption avoided state regulation. This prevented state regulators from monitoring the activities of companies that became insolvent because of mismanaged and diverted plan assets.
Congressional hearings uncovered stories of individuals who lost their homes, their credit, and sometimes lifesaving treatment because their claims had not been paid by MEWAs that had failed. Ultimately, these exemptions were repealed, but similar abuses are likely if Congress decides to exempt AHPs from important state health-insurance regulations - higher costs, fraud and abuse, as well as unpaid medical bills.
A federal AHP exemption would be bad medicine for the very small businesses and consumers it purports to help. Congress should reject a federal AHP exemption.
Kerrie Jones Clark is executive director of the Rhode Island Health Center Association.
