NEW YORK -- In his State of the Union address Tuesday, President Bush gave some hope to small business owners struggling with the soaring costs of health insurance, calling on Congress to approve the creation of association health plans, or AHPs.
These plans allow small companies to band together and buy insurance at much cheaper rates than they currently can get on their own. Small-business advocates have long lobbied for passage of AHP legislation; last year, the House approved an AHP bill, but the measure didn't make it out of the Senate.
But not all small-business advocates believe AHPs are the solution.
Todd McCracken, president of the Washington-based National Small Business Association, worries that AHPs may "do more harm than good."
"They (the AHPs) may choose not to include some more expensive coverage," McCracken said, adding that in such a case, sicker or older workers would be forced to look elsewhere for coverage. Or, a company wanting to help its workers would be forced to buy more expensive coverage from a different provider, defeating the purpose of the AHPs.
McCracken said insurers would be able to exclude some medical conditions because AHPs would not be bound by state laws.
Yet, many small-business lobbyists are hopeful that with Bush's endorsement, AHPs will make it through Congress this year.
The problem is that small companies, unable to achieve the same economies of scale as businesses with thousands of employees, are being hit by double-digit premium increases. According to the National Federation of Independent Business, which is lobbying for the creation of AHPs, 60% of the more than 40 million uninsured Americans work for small businesses.
A law permitting the nationwide formation of AHPs would allow insurers to bypass state coverage requirements and offer one policy across the country. Currently, a health insurance policy must provide whatever coverage is mandated in the state where the insurance is sold.With those state barriers removed, more companies could buy into the same policy, lowering the costs for all.
Ianthe Jackson, an NFIB spokeswoman, said AHPs would comply with federal coverage mandates under ERISA, the law that governs employee health benefits.