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Association Health Plans: A Godsend, or a Recipe for Disaster?

Capitol Hill has its hands full debating whether AHPs are the right solution to the health-care crisis for small-business owners. What's your take?

Leaders in Congress have introduced a controversial bipartisan health-care bill that would empower small businesses to use group force to compete for low-cost medical coverage. The legislation banks on the viability of Association Health Plans (AHPs): medical coverage purchased through trade guilds on behalf of the small businesses that make up their membership.

AHPs have existed for decades, both nationally and on the local level. But the Small Business Health Fairness Act would exempt them from state insurance regulations, a key advantage long enjoyed by union and corporate health plans.

Advocates claim that this "strength in numbers" approach could finally narrow the gap in benefits between small and large companies. "Absolutely they will help," says Debra Faraone, president and owner of The Elements Inc., a small marketing firm in Virginia. "It is the only answer to lowering these outrageous costs and leveling the playing field."

The bill, however, has triggered aggressive debate over whether AHPs can actually wrestle down skyrocketing premiums and broaden the options available to employees. While small-business and trade organizations in the hundreds have endorsed the bill, the legislation has provoked opposition in the health-care field, including from medical associations and insurance companies. Such groups argue that in the absence of local regulations, AHPs will be free to gouge customers with high premiums; would select only low-risk candidates; and, in a worst-case scenario, might destabilize the entire health-care industry.

Susan Jacobs, president of New York-based Hamilton Green & Company Ltd., argues that the small-business clients of her insurance agency would never see the 15 to 30 percent savings on health-care costs that advocates of the bill have promised. "Almost all our clients that have been covered at some time through AHPs have had their rates increased and/or current coverage dropped or modified on very short notice," Jacobs says. "We have been in business since 1992, and our overall experience with AHPs has been extremely poor."

Even if businesses did see a dip in their premiums, Jacobs asserts, the discount wouldn't be permanent. She notes that insurance companies have long struggled with the question of how to price their AHPs fairly, grappling with fluctuating enrollment and other unpredictable factors that often lead them to drop the plans entirely. "When there is a rate advantage, it is usually only a temporary one," Jacobs says. "We see very little pricing advantage and feel most small businesses are better off having direct contact with the insurance company."

AHP Resources on the Web
  • www.ahpsnow.org: a Web site promoting AHP legislation, offering updates, background information, and a list of trade guilds and organizations backing the bill
  • www.dol.gov: the online home of the U.S. Department of Labor
  • www.house.gov: the official Web site for the U.S. House of Representatives
  • www.insureourfuture.org: the online home of Insure Our Future, an AHP opposition group
  • www.mhlg.org: Web site for the Mental Health Liaison Group, which opposes AHPs
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