NAIC Reasserts Its Opposition To Association Health Plans

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Fending off criticism that they had veered from their stance opposing association health plans, state insurance regulators reiterated their opposition to these plans.

The restatement of its position by the National Association of Insurance Commissioners, Kansas City, Mo., followed concerns raised during the spring NAIC meeting last month that written remarks presented by an Arkansas insurance regulator during testimony before Congress, supported AHPs.

What also was voiced during the spring meeting was the general opposition of consumer advocates, insurers and regulators to plans they claim would be costly and anti-consumer.

“It will have a devastating impact on the small group health market,” said Joan Gardner, executive director for state services with the Blue Cross/Blue Shield Association, Washington, during the NAIC meeting. One reason for this, she explained, is that they will make health insurance even more expensive than it is now.

State regulation would be replaced by oversight by the Department of Labor, which does not have the resources to ensure that AHPs are properly regulated, she continued.

Additionally, the point was raised that prompt pay laws and laws that provide for “fair competition in the marketplace would not be there under federal regulation.”

“AHPs are not a magic bullet for containing health care costs,” said John Nelson, a member of the executive committee of the National Association of Health Underwriters, Arlington, Va.

But for employers who are desperate to find a way for their employees to receive health care, they could join, he added.

Consumer advocates are also not enamored of AHPs. They do not help the uninsured, many of whom are women, says Alice Weiss, director of health policy with the National Partnership for Women & Families, Washington.

A study by the Congressional Budget Office found that only 330,000 uninsured people were able to be insured because of AHPs, she said. And, there is actually a good chance that they will hurt the market because they make it possible to avoid state benefit mandates, Weiss said.

During the NAIC meeting, Weiss applauded the NAIC for its opposition to AHPs but expressed concern that written testimony presented to the Small Business Committee of the U.S. House of Representatives would send a mixed message about the NAICs opposition.

She said the testimony, presented by John Hartnedy, deputy commissioner with the Arkansas insurance department, could be construed as support by regulators for AHPs.

Weiss said that not only did the written testimony vary from the NAICs position but, in addition, that the “Arkansas insurance staff negotiated directly with the Bush administration” on the issue.

It was a statement that Mike Pickens, Arkansas insurance commissioner and president of the NAIC, challenged in a letter dated March 14.

Weiss said the situation raised the need to make sure that the testimony of state insurance regulators is thoroughly vetted by the organization on issues on which the NAIC has taken a position.

In response, Joel Ario, NAIC Secretary-Treasurer and Oregon Insurance Administrator, said the NAICs position is clear: It is opposed to AHPs.

Indeed, the NAIC sent letters to Congress in mid-March opposing both a House bill, H.R. 660 and Senate Bill, S. 545.

The letters cited the likelihood of cherry-picking, the possibility of inadequate capital standards and solvency requirements, the elimination of state consumer protection laws, and the possibility of sidestepping state benefit requirements.

After the session, Weiss said she was definitely encouraged by Adminstrator Arios remarks.

But Washington Insurance Commissioner Mike Kreidler said he was “very distressed” with Hartnedys remarks, explaining that “it goes against what he thought the organization stood for.”

Kreidler raised the possibility that the remarks will be used by some members of Congress to show state insurance regulators lack of ability to act in a cohesive way.

Kreidler added, “If this organization wants me to contact my legislators, there cant be mixed messages. It undermines the credibility of the NAIC.”

In an interview with National Underwriter, Hartnedy said that in his opening remarks he indicated he did not support AHPs.

Hartnedy said he has not worked with anyone in the Bush administration on the issue.

As Hartnedy explained, starting from a point of opposition, he indicated that if such legislation did progress, there were certain things federal lawmakers should be aware of. State insurance regulators can walk in and say they do not support it and be left out of the conversation, he said. Or, they can say they do not support it, but if Congress was going to go ahead on the issue, there are certain points that are likely to be raised.

In this context, Hartnedy said, he raised the point that AHPs were likely to create the possibility of cherry-picking, with healthy individuals choosing not to participate in AHPs.

In his written testimony, he said “AHPs can effectively pool segments of the markets without disturbing the current overall market.”

But, he continued, the “primary challenge is keeping membership in the group if and when the cost of health care coverage rises.” The pool is more stable when the reason for membership in the association is not primarily insurance, he added.

In addressing cost, Hartnedy noted that AHPs had the potential to reduce overhead but by no more than 5% to 15% since large employers and carriers had already “negotiated rock bottom prices.”

In Arkansas, according to Hartnedy, there is a law on the books that is similar to AHP legislation passed two years ago.

In his testimony, he said he told members of the committee that if they proceeded, state insurance regulators should oversee regulation of solvency because of expertise with tools such as risk-based capital requirements.

Hartnedy reiterated the importance of participating in discussions and said Sen. Olympia Snows office was in contact with the Arkansas department to learn more about AHPs. In fact, he continued, contact had been made during the NAIC meeting.

Despite opposition from these constituencies, testimony from small business executives in a hearing before the U.S. Senate Committee on Small Business Entrepreneurship cited the need for health care options including AHPs.

Citing “how impossible the task of offering good health care insurance coverage has become for small businesses like mine,” Kathie Leonard, president and CEO of Auburn Manufacturing in Maine, argued for AHPs.

These plans would “supersede the state-mandated benefits and community rating systems that have unfairly burdened small business. If premium increases can be reduced in the short-term with these Association Health Plans, we may be able to hang on a little longer while other national, long-term approaches are developed.”

AHPs are present “choices that result in new jobs that are at the core of a healthy community and a sustainable future,” said Anne Valentine, president of SmartCatalog, Portland, Me.


Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.