In response to a Senate hearing on Wednesday, interest groups are lining up for and against proposals to allow small businesses to band together under association health plans to buy health insurance.
The Senate Small Business Committee heard testimony on whether it should draft a bill allowing association health plans and possibly exempting them from state insurance regulations, such as mandated benefits, to provide affordable coverage for small businesses.
"Massive health insurance premium increases of 40% to 50% and higher are the reality for a number of small businesses in America today," the Associated Builders and Contractors said in a release Wednesday. "Association health plans can reduce health insurance costs by 15% or more by allowing small businesses to join together to create economies of scale and bargaining clout."
The Center for Studying Health System Change acknowledged that small employers are much less likely to offer health insurance than large firms. In one survey, 47% of firms with fewer than 50 workers offer health insurance, compared with 97% of companies with more than 50 workers, the center says in a release.
But the center argued that "mandated benefits add relatively little to the cost of health insurance" and warned that association health plans might attract healthier enrollees, leaving other insurers with higher-cost people.
The center also warned that, over time, some firms might opt out of AHPs when they find lower premiums on their own, "leaving the AHP with a deteriorating risk pool that could lead to rapidly increasing but actuarially fair premiums over time."
In a related matter, nearly one in five small employers that offer health coverage modified their benefits in 2002, usually to cut their costs, according to study by the Employee Benefit Research Institute.
Of those that made changes, 65% increased co-payments or deductibles, 30% raised the percentage of premiums the employee pays, 29% cut back on the benefits package and 35% switched insurers, according to the survey, released last week.
The survey also shows that 26% of companies that made changes actually provided richer benefits, but some reported that they reduced or eliminated pay raises or bonuses, reduced other employee benefits or delayed investments.
"The cost pressures of rising health insurance make it likely that employees at small employers will continue to pay more for health insurance--if their employer offers the benefit at all," EBRI President Dallas Salisbury says in a release.