Small-Business Health Plans
Advance in Senate
Measure Would Override State Rules to Let Groups Offer Low-Cost
By Sarah Lueck
The Wall Street Journal
Monday, March 13, 2006
WASHINGTON -- After years of setbacks, the Bush administration
and the small-business lobby are making progress on a top
priority: a federal law that would override some state
insurance regulations to let small companies band together to
offer their workers scaled-back, low-cost health-insurance
The bill, which will be voted on Wednesday by the Senate Health,
Education, Labor and Pensions Committee, would allow trade
associations to sell "small-business health plans" --
essentially group health plans -- to their members on a national
or regional basis without having to offer all the benefits
mandated by states in which the workers are employed. If the
committee, under Chairman and Wyoming Republican Sen. Mike Enzi,
approves the bill as expected, it would mark the Senate's first
official action -- and a potential breakthrough -- on an issue
of prime importance to the National Federation of Independent
Business, or NFIB, one of the Republican Party's closest allies.
At a time when rising health costs are relentlessly pressuring
small businesses, supporters say the legislation would provide
relief without creating an expensive government program.
Critics, including most Democrats and some consumer and patient
groups, say the legislation would gut state protections for
patients. The American Diabetes Association expressed concern
that the plans would be able to avoid state mandates on coverage
of diabetes supplies and medication.
For years, the NFIB has sought passage of legislation that would
allow trade associations to pool members to sell group policies,
known as Association Health Plans, or AHPs, regulated by the
federal government. Eight times, the House has approved such
legislation, which would allow the AHPs to bypass state rules,
often stricter and potentially more costly than federal
regulation. The AHP bill never got traction in the Senate, in
part because of opposition from state regulators and health
State regulators opposed a cutback in their clout. Insurers,
whose small-business health plans are regulated by the states,
worried that AHPs would have a competitive advantage because
they would be operating under the easier federal regime.
To try to defuse the opposition, Mr. Enzi, in fashioning the
bill, preserved a role for state regulators. And in a
potentially sweeping change designed to assuage the insurers, he
eased some state requirements for them, not just for the
Under his bill, both insurers and small-business associations
would be allowed to sell lower-cost policies that don't include
state-mandated benefits, as long as they offer comprehensive
coverage. The result: For now, at least, insurers are holding
their fire. Some common state mandates include requirements
that mammograms and some substance-abuse treatment be covered.
Mr. Enzi's efforts succeeded in winning over Sen. Judd Gregg, a
New Hampshire Republican, who had been critical of AHP
legislation, and Democratic Sen. Ben Nelson of Nebraska, a
former state-insurance commissioner.
Mr. Enzi's legislation would create a uniform federal standard
on how much insurers, in setting premiums, can consider workers'
health status. The standard would give insurers that sell
policies to small businesses and individuals more leeway to
charge higher premiums for sick people than is permitted under
some states' rules. Supporters say that would bring down
premiums for healthier people and make coverage more
affordable; critics say it would make coverage costlier for
sicker people. Insurers would be allowed to follow the federal
standard or stick with the state law.
"We need to give small-business owners a safe place to get off
this escalator of rising costs, some place where they can find
more affordable health-insurance options," Mr. Enzi said last
week, as his committee had its first meeting to consider the
Mr. Enzi's legislation has a long list of supporters, from the
National Association of Realtors to the American Disc Jockey
Association. Some supporters would benefit by getting access to
cheaper health insurance, while others could earn money by
selling coverage to members. The NFIB is intensifying its
advertising and lobbying push as the committee prepares to
vote. The group is focusing its efforts on senators in tight
re-election races, including Ohio Republican Sen. Mike DeWine, a
member of the health committee. Wednesday, the group will
distribute stickers backing small-business health plans, as it
did last week, saying "Pass SBHPs now."
"It's important to cover your bases," says Amanda Austin, NFIB's
manager of legislative affairs. "The Senate has been the
stalled body. The urgency is finally here."
Sen. Edward Kennedy of Massachusetts, the ranking Democrat on
the health committee, is leading the opposition to the
legislation, saying it is "a blank check for the insurance
industry" that would result in "higher premiums and lower
benefits for millions of Americans with reliable health coverage
today." Democrats could decide to filibuster the bill on the
floor if it is approved by the committee.
The Foundation for Taxpayer and Consumer Rights, a consumer
group in Santa Monica, Calif., complained that the legislation
could mean the loss of state protections such as California's
requirement that women have a right to visit a gynecologist. "A
panoply of patient services could ... be eviscerated," including
the right to a second opinion from a doctor, the group said.
Supporters of the legislation say state mandates can make
insurance so costly that small businesses and their workers
can't afford it. They argue that small businesses -- not the
states -- should decide what benefits to pay for.
Groups representing health insurers, while not opposing the bill
overall, are taking issue with some individual provisions. They
are concerned that whatever passes the Senate will, in a
House-Senate conference committee, be rewritten to include
objectionable elements from the House AHP legislation.
The Blue Cross and Blue Shield Association, the umbrella
organization that regulates use of the Blues brand, said in a
letter to Mr. Enzi that its members are reviewing what
"represents a major rewrite of the existing health-insurance
laws across the country."
America's Health Insurance Plans, an insurance-industry trade
group based in Washington, said it is concerned that the
legislation, by permitting the sale of low-cost plans that
bypass state requirements, would drive up premiums for people
choosing more-comprehensive policies.
"Groups that do not envision requiring costly health-care
services would be likely to opt for the lower-cost plan, while
groups expecting high health-care utilization would be inclined
to select the comprehensive option ... ultimately pricing many
small employers out of the market," wrote AHIP President Karen
Write to Sarah Lueck at