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Association health plans option in legislative limbo

By KRIS HUNDLEY, Times Staff Writer
© St. Petersburg Times
published August 25, 2002

In the search for cheaper health insurance, some small businesses are turning their employees over to staff leasing companies that have more bargaining power with insurers. Others are dropping coverage for dependents. And some are holding out hope that Congress will finally pass a law allowing association health plans to operate nationally.

Proponents of AHPs, which would be sponsored by trade associations and regulated by the Labor Department, say such groups could save small businesses 15 to 30 percent on health insurance.

Joe Rossmann, vice president of fringe benefits for Associated Builders and Contractors Inc., said his trade group operated an AHP for many years at substantially lower cost than commercial insurers.

"Our program cost 13.5 cents on every dollar for administrative expenses, compared to 30 to 35 cents on a dollar for most small group insurance," Rossmann said. "We didn't have the marketing costs or agent commissions, and any excess stayed in the trust."

The group's plan, which had to be licensed in every state, eventually became too unwieldly to administer, and health benefits were dropped. That's why the group is lobbying, along with the National Federation of Independent Business and dozens of other trade groups, for laws that would allow AHPs to be treated like big corporate and union health plans, with a single set of federal regulations.

"The legislation would allow for consistency across state lines," Rossmann said. "We would have one big pool, and all members would operate under that set of rules."

Though the House of Representatives has passed AHP legislation four times since 1996, the bill has never made it through the Senate. Rossmann and others are hopeful that will change since President George W. Bush came out in favor of AHPs in the spring.

But the bill still faces strong opposition from state insurance regulators as well as traditional insurance companies. Torre Grissom, legislative assistant in Florida's Insurance Department, said states are best able to regulate insurers. "And when there's not good, close regulation of plans, you end up with employees with no one to pay the bills," he said.

Grissom also doubts trade groups could get a better rate than established insurance companies. And he fears that if they do offer lower rates, they'll drain healthy workers out of the commercial pool.

That's much the same argument made by a spokeswoman for Blue Cross Blue Shield of Florida, who said the insurer, which has about 27 percent of the state's small group market, opposes the legislation.

To Rossmann at the builders' trade group, such arguments sound like so much turf protection.

"As insurance costs go up and the profits of insurance companies continue to rise, we're going to have to find a solution for small employers," he said. "And this is a solution that doesn't cost the government anything."

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