by Melissa Morrell, GSABusiness
According to the most recent Kaiser Foundation study, small group health insurance premiums have increased 12% across the country last year. The Center for Studying Health System Change estimates that in 2001 the average premium increase for South Carolina small businesses was 14.5%.
Premiums have risen every year for businesses since 1990. As a result, the Kaiser Foundation estimates that while 56.7% of private sector firms in South Carolina offer health insurance to their employees, only 39.7% of companies with fewer than 50 employees do so.
Large employers often elect to be self-insured to control their health insurance costs, an option not available to individual small businesses. In the face of this escalating situation, a number of legislative proposals have surfaced at the federal and state level.
While Congress has considered federal legislation aiding association health plans (AHPs) before, this time around legislation for AHPs (the Small Business Health Fairness Act of 2003) has the backing of the Bush Administration.
“AHPs are not new. They¹ve been around for about 10 years,” says Keith Kiser, senior vice president and regional employee benefits manager with BB&T Insurance Division in the Carolinas. “They worked for a while. but many plans ended up with adverse selections and less profitability thus the private sector has rapidly given up on this market.”
Simply defined, AHPs would enable business owners to band together across state lines through membership in trade or professional associations to buy health insurance for themselves and their employees. The associations could buy insurance or self-insure. Smaller premiums would accrue from bargaining clout, administrative savings, flexible benefit designs and the ability to self-insure.
Experts claim that AHPs would lower premiums by 13% and provide coverage for 2 million uninsured Americans.
The business community has split over whether to back such legislation authorizing association health plans, even though AHPs might make health insurance more affordable for thousands of small businesses. The promise of cheaper health insurance has drawn the backing of many trade associations.
“Because these plans would be exempt from state coverage mandates, it would create an un-level playing field,” Kiser says. “The AHPs could lead to higher costs for consumers. They¹ll raise premiums for sick enrollees, and they¹ll pull people form existing insurance coverage rather than attract the uninsured.”
Kiser adds that this approach could open the flood gates for others to form not-for-profit organizations for the sole purpose of providing affordable health plans.
The SC Small Business Chamber of Commerce has been an integral player in the drafting of a recent state bill that would act and run parallel to the state employee insurance program.
“The primary intent of this legislation is to create a large pool of small employers for the purpose of self-insured health insurance for the employer and their employees with the goal of achieving affordable, stable health insurance premiums,” says Frank Knapp, executive director of The SC Small Business Chamber of Commerce.
Unlike the AHPs, this legislation does not require a small business to join an association.
“This legislation addresses the benefits that small business pooling can have to control health insurance costs by spreading the risk and negative experience over tens of thousand of policy holders,” Knapp says.
Kiser says small business must assess the value of joining an association beyond the benefits of an affordable health plan. He says there can often be significant dues and other fees connected with such a decision.
Under the SC Small Business¹ legislation, the SC Employee Insurance Program of the Budget and Control Board would be responsible for, as part of the state health plan, a small employer self-insured plan (SESIP). The third party administrator used by the state health plan would provide the same services to the SESIP, according to Knapp.
“The private sector employers and their employees should and will be responsible for paying for this plan,” Knapp says. “The Small Business Chamber would not support any plan that puts public money in jeopardy.”
While seed money will be needed to create this system in the beginning, Knapp says the foundation and federal funds should be sought first and only then state resources used to be reimbursed by the private fund.