The Health, Education, Labor, and Pensions (HELP) Committee of the U.S. Senate passed a Small Business Health Plans (SBHPs) bill March 15, sending the legislation to the full body for a floor vote, which is expected in May. If it passes, the bill will have to be reconciled in committee with a House-passed version.
Sponsored by Sen. Mike Enzi (R-ID) and co-sponsored by Sens. Ben Nelson (D-NE) and Conrad Burns (R-MT), the legislation would allow small businesses to buy health insurance for employees through professional and trade associations, such as the National Federation of Independent Business (NFIB) and National Restaurant Association. By pooling their members into a larger pool, associations expect to be able to offer lower health care premiums to small business employees. The associations also will be able to offer plans that don’t include expensive state-mandated benefits, such as in-vitro fertilization, that drive up the cost of insurance.
“Today, the Senate … took a significant step toward ending the health insurance crisis facing the largest portion of America’s uninsured population–the 27 million men, women, and children covered by the small business community,” NFIB Executive Vice President Dan Danner said in a March 15 statement. He urged the full Senate to pass the bill when it comes up for vote, calling it “a fair, common-sense and badly needed solution” to rising health care costs.
Similar Advantages
The bill will give small businesses many of the same advantages unions and big businesses already enjoy when it comes to providing health care to members and employees. Currently, unions and big businesses can self-insure, allowing them to offer a uniform set of health benefits nationwide and avoid costly regulations and mandated benefits imposed by the 50 states.
In addition, unions and big businesses are able to take advantage of their size to negotiate better deals with hospitals and other providers, while spreading the administrative costs over a large number of insured people. SBHPs will allow small businesses to gain the same bargaining clout and efficiencies of scale while avoiding burdensome state regulations and mandates.
In a March 15 statement, Enzi predicted SBHPs would “harness the power of America’s small business owners” and “transform health insurance to a market where small employers and family-owned businesses can demand better benefits at better prices.”
Interest Group Opposition
Frank Timmins, president of the Texas-based consulting firm MedCon Benefit Systems Group, agreed SBHPs will help level the playing field between small business and big unions and corporations.
“One of the primary reasons that big business self-insures is to avoid onerous and costly state regulations,” Timmins said. “The SBHPs would gain similar advantages, and SBHPs should be able to react quickly to market changes or other innovations in health care services.
“There is no question that SBHPs will tend to lower costs for small business,” Timmins said.
Some groups, however, are concerned about SBHPs’ impact. Before the vote, the American Chiropractic Association released a strongly worded statement condemning the proposal, saying it would “thwart years of state efforts to ensure that consumers have adequate health insurance coverage, including chiropractic.” Chiropractic associations have succeeded in persuading 46 states to mandate that health insurance include some level of chiropractic care.
Accumulated Costs
The cost of chiropractic care and other mandates can significantly raise the cost of insurance. According to a March 2006 study by the Council for Affordable Health Insurance (CAHI), Health Insurance Mandates in the States 2006, mandated chiropractic care adds between 1 percent and 3 percent to health care premiums. Other mandates are even more expensive. In-vitro fertilization, required in 14 states, adds 3 to 5 percent, while mental health parity laws–requiring that dollar limits on mental health benefits be no lower than limits on medical and surgical benefits–in 42 states increase premiums by 5 to 10 percent.
According to the CAHI study, there are more than 1,800 mandated benefits in the 50 states, which “increase the cost of basic health coverage [by] a little less than 20 percent to more than 50 percent, depending on the state.”
Ron Pollack, president of the liberal advocacy group Families USA, claimed in a March 15 statement the SBHPs bill would “undermine state measures that safeguard the health and the wallets of more than 85 million Americans.” He specifically cited cervical, prostate, and colorectal cancer screenings as services that could be eliminated by SBHPs.
Defending his bill from attacks by what he termed “a few special interest groups,” Enzi pointed to provisions that challenge Pollack’s claims.
“My bill doesn’t take away anyone’s right to a comprehensive benefit package,” Enzi said in his statement, noting, “at least one comprehensive policy must be offered to every small or family-owned business.”
Positive Steps
Enzi also cited real-world experience with self-insured companies. Nearly all offer cancer screenings, despite the fact that they are not required to do so.
“What we are doing with this legislation is giving small businesses the same power that big businesses have,” Enzi said. “Small businesses will choose to offer services like cancer screenings just like big businesses do.”
NFIB strongly supports the bill. On its Web site, the group cites research from CONSAD Research Corporation, an economic and public policy analysis consulting firm based in Pittsburgh, which found as many as 8.5 million previously uninsured workers could become insured if SBHPs are enacted. The Congressional Budget Office estimates premiums would be reduced by an average of 13 percent with SBHPs.
Mercer Oliver Wyman Actuarial Consulting, a Milwaukee-based firm, came up with a similar number, estimating SBHPs would reduce premiums for small business by 12 percent and would reduce the number of uninsured Americans by 8 percent, or about 1 million people, according to the NFIB Web site.
Optimistic Outlook
The bill’s Senate supporters are optimistic about SBHPs’ potential to address rising health care costs and reduce the number of uninsured, and they believe an overwhelming number of Americans support allowing small businesses to offer the plans. In a March 30 news conference, Enzi and Nelson released the results of a survey showing 89 percent of Americans favored the idea–including 93 percent of Republicans and 86 percent of Democrats.
“This survey confirms what we’ve all been hearing from our constituents: Health insurance costs are out of control, and a vast majority [of Americans] support lower health costs for small businesses,” said Nelson, a former state insurance director. “Our bill will lower health insurance costs for small businesses. By giving these small businesses purchasing power, this bill will expand access to health insurance for nearly one million American workers.”
Sean Parnell ([email protected]) is vice president of external affairs at The Heartland Institute.
For more information …
Health Insurance Mandates in the States 2006, issued by the Council for Affordable Health Insurance, is available online at http://www.cahi.org/cahi_contents/resources/pdf/MandatePub2006.pdf.
Sean Parnell ([email protected]) is a research fellow for health policy at The Heartland Institute.
