The Healthcare Crisis

Small business health plans would “level the playing field and give participating small businesses the same buying power as Fortune 500 companies and unions by allowing them to join together across state lines through trade and professional associations to purchase affordable health benefits,” according to The National Federation of Independent Business (NFIB).

S. 1955 differs from the Small Business Health Fairness Act of 2005 (H.R. 525), which was passed by the House last July, says Lucia Riddle, VP of federal government relations for the Principal Financial Group. “Both bills allow associations to have nationwide benefits,” Riddle says, but “the House bill would eventually allow associations to be self-insured and regulated by the DOL, like single employer self-insured plans.” Under the Senate bill, “associations would continue in the insurance marketplace–in other words, they would be fully insured, and be regulated by the state of domicile of the association plan.” The big question with S. 1955 is whether it will get the 60 votes needed for cloture, according to Riddle. Some senators have expressed concerns that the bill “would allow associations and insurers to market plans without a lot of the state mandates,” she says.

Another way to address the crisis is through tax incentives. The Bush Administration and the financial services industry, it now appears, are counting on Health Savings Accounts (HSAs) to provide some assistance to consumers. HSAs, which are accounts that consumers can contribute to tax-free to save for future medical expenses, are gaining in popularity. Just two years ago there were only one million of them, today that number has jumped to three million. To encourage more participation, Mark Warshawsky, the assistant secretary of the Treasury, told attendees at the recent “DOL Speaks” conference in Washington that the administration is proposing that the limit on annual HSA contributions be raised from the deductible to the policy’s out-of-pocket maximum. Also, he said, the administration proposes full income tax deductibility of premiums on all HSA-qualified policies, whether those premiums are paid by an employer or an individual. Yet a further expansion of deductibility being proposed, he said, would allow for an income tax credit equivalent to the payroll tax on premiums for HSA-qualified plans and HSAs, whether the plan is purchased in the individual or group market.–Melanie Waddell