Small Business Health Insurance Bill Fails

Published August 1, 2006

A bill to allow small businesses to band together to purchase health insurance, S. 1955, did not reach the 60 votes needed to obtain cloture in the U.S. Senate in May.

In a party-line vote, the measure garnered the support of just two Democrats–Sens. Ben Nelson (D-NE), a former state insurance commissioner, and Mary Landrieu (D-LA). Sen. John Chafee (R-RI) voted against it, as did Sen. Jim Jeffords (I-VT), who is retiring at the end of this session. Two other senators were absent.

In part, the debate was a referendum on state mandates for insurance coverage. As Sen. John Cornyn (R-TX) explained on the Senate floor May 10, according to the Congressional Record, “It makes no sense to say that everyone must have a Cadillac with all the bells and whistles when all some people want or can afford is a basic model of a similar vehicle. Under [this] bill, every small-business owner will have the opportunity to choose a comprehensive plan, but they will also have other, more affordable, high-quality choices, too.”

Standardizing Mandates

As reported out of the Senate Health, Education, Labor, and Pension Committee, the bill would have allowed basic health insurance plans, ones that do not meet all the current mandates required by various states, to be offered in every state.

The standard was that each health insurance provider must offer at least one plan with all the benefits included in plans offered to state employees in the five most populous states: California, New York, Texas, Illinois, and Florida.

The new standard would have applied to the entire small group and individual market, not just the small business health plans. It would have applied to mandates regarding which services and providers must be covered, and also to mandates regarding pricing of insurance plans. In effect, it would have prohibited states from enforcing guaranteed issue, a mandate requiring that insurance groups offering coverage accept every employer who applies.

In an effort to pull in more votes for the bill, committee chairman Sen. Michael Enzi (R-WY) modified the section on insurance price-setting. His changes would have allowed states to continue to use community rating (currently used by 10 states) or require them to set narrower parameters for rate bands (5:1 ratio). Community rating means states can bar firms from using an individual’s health status as a factor in giving insurance coverage; changing the rate bands means no one can be charged more than five times more than the lowest rate in the group.

Sen. Olympia Snowe (R-ME) offered another compromise, which would have increased the number of services that must be offered under even the basic plans. In an attempt to appease senators concerned about “mental health parity” and coverage for diabetes, cancer screening, and other diseases, Snowe’s amendment would have required all plans to cover treatments such as in vitro fertilization or alcoholism rehabilitation, so long as the treatment is already mandated in at least 26 states.

Encountering Opposition

Despite these amendments, campaigns in opposition to the bill were mounted by a coalition of organizations including the American Association of Retired Persons, American Diabetes Association, and American Cancer Association, which took out full-page ads in The Washington Post, Roll Call, and other national papers and urged members to lobby their legislators.

After the bill failed to obtain cloture, Enzi said he was not finished.

“The voice of people without insurance keeps getting louder,” Enzi said. “My colleagues will have to listen. We’re going to keep up the effort to move small business health plans forward.”

Although time is running out to consider legislation before Congress recesses for the November elections, insiders said it’s still possible they could take some action to expand or enhance Health Savings Accounts in this session. Most likely, that action will originate in the House of Representatives, or it could be tacked onto another important bill as an amendment. A hearing on proposals in the House Ways and Means Committee was pending at press time in early July.

Laura Clay Trueman ([email protected]) is executive director of the Coalition for Affordable Health Coverage and senior director at Jefferson Government Relations.