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Prospects Looking Dimmer For Association Health Plan Bill

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A climactic vote on legislation that would create “association health plans” was nearing in the Senate at press time, with most congressional staffers and industry lobbyists expecting the bill to fail to garner the votes needed for passage.

The key vote will be on a manager’s amendment to the original bill as passed by the Senate Health, Education, Labor and Pensions Committee on March 15.

The bill is S. 1955 as modified and is called the Health Insurance Marketplace Modernization and Affordability Act. It has strong administration support, and a similar bill has passed the conservative-dominated House several times.

The Bush administration issued a statement expressing support for the bill, saying, “The administration applauds efforts to find ways to lower costs by reducing unnecessary administrative complexity and expense, as well as to allow the opportunity for a health insurance market available across state lines, and will continue to work with Congress in this area.”

In general, the bill would allow small businesses and trade associations to form association health plans across state lines.

Under the bill, insurers would be permitted to sell plans that do not meet current state benefits requirements to businesses and individuals. However, they then also would have to offer a plan with benefits provided under a state employees’ plan in one of the five most heavily populated states–California, Florida, Illinois, New York and Texas.

In addition, the bill would pre-empt state laws that limit how much insurers can vary premiums from one small business to another.

The latest version is designed by the bill’s primary sponsor, Sen. Mike Enzi, R-Wyo., to move away from the National Association of Insurance Commissioners Model Act on health insurance and toward a 5/1 cap on all rating factors as a rating “floor.”

Under the modified bill, an adopting state now is defined as a state “that has enacted small group rating rules that meet the minimum standard of having a total variation limit on all rating factors that is not less than 5/1,” according to one analysis of the latest bill.

Within that 5/1 band is a smaller cap on certain factors of 3/1, according to one analysis of the latest bill.

There are four factors that fall under the 3/1 cap: age, duration of coverage, claims experience and health status.

Under the manager’s amendment, the bill would require health insurance issuers to use age and/or health status, and they may also use duration of coverage and/or claims experience.

There are 10 rating factors that fall under the overall 5/1 cap: age, duration of coverage, claims experience, health status, industry, geography, group size, participation rate, class of business and participation in wellness programs.

The manager’s amendment preserves a provision–known as the “high-low option” –that was approved in March by the Senate HELP Committee.

Under this language, insurers may offer basic plans in the small group market, individual market, large group market or through a small business health plan that does not meet the mandate requirements of the state if they also offer an “enhanced option” that includes either: (1) all the mandates in the state; or (2) the mandates covered by a state employee plan in one of the five most populous states.

Small business health plans would have a head start in offering basic plans three months before other carriers, according to one analysis.

The Senate started debate on the bill May 9 as part of the Republican Senate leadership’s so-called “health week” initiative, which was widely seen as an effort to embarrass Democrats by forcing votes on controversial legislation they won’t support.

For example, Democrats were forced to vote against cloture, which prevents filibusters, not once but twice on medical liability tort reform legislation: once for S. 22, which was the general version that already had failed to win cloture several times over the past few years; and S. 23, a bill with similar language that would only apply to OB-GYN specialists.

The plight of OB-GYNs was a recurring theme for Republicans throughout the debate as they told tales of expectant mothers being forced to drive great distances for pre-natal care because of alleged out-of-control medmal insurance premiums.

On the AHP bill, debate continued with most industry lobbyists expecting that a final vote on the substitute bill would occur either late May 11 or early May 12.

The NAIC has not taken a direct position in opposition, but officials in several large states, including California, have been outspoken in their opposition.

In a statement, California Attorney General Bill Lockyer recently attacked the legislation in the strongest terms, calling it a “federal junk health plan bill,” and complaining that it would “eliminate” state health insurance consumer protections.

“By causing consumers to lose the rights they currently have under state laws…, S. 1955 seems to be moving toward federal pre-emption of market standards and policy approval. These always have been within the purview of the states, and Congress should not change a system that has worked very well for over a century.”

Health insurance industry critics include many provider groups and such insurance groups as the Blue Cross and Blue Shield Association, Chicago, and the National Association of Insurance and Financial Advisors, Falls Church, Va. The National Conference of Insurance Legislators is also a strong opponent.

Reflecting the dilemma, an America’s Health Insurance Plans staff official said, “We are under specific board directive to remain neutral on this bill.

“While we have consistently worked in a bipartisan fashion to provide technical support on issues concerning small business health plans, we have specifically not taken a position on the underlying bill itself,” the spokesman said.

But the National Association of Health Underwriters has voiced strong support for the bill.

Democrats were planning to offer a number of amendments likely to be seen as unacceptable to the Republican majority. One, by Sens. Richard Durbin, D-Ill., and Blanche Lincoln, D-Ark., is a substitute bill, S. 2510, which also would allow small businesses to partner to purchase health insurance. It would be based on the Federal Employees Health Benefits Program and would be run by the Office of Personnel Management. Durbin said the bill would preserve state coverage requirements and provide tax credits to help employers get coverage for low-wage workers. He estimated the bill would cover more than three times as many people as Enzi’s bill.

Others would extend the deadline for the Medicare prescription drug program enrollment. One, by Sen. Olympia Snowe, R-Maine, would allow the government to negotiate prices to be paid for drugs used under the program.


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