Good Health by Association
Rather than remain as a basic component of the business equation, insurance has become a driving force in economic trends. Health, liability, workers’ compensation, even auto insurance premiums have moved into the driver’s seat and are shaping the development of many industries. While the present climate in Washington tackles regulations and taxes, insurance rates and availability are influencing business decisions more than most federal laws.
Yet in the 108th Congress, there is an effort to relax laws and address the skyrocketing health insurance premiums that are crippling many sectors. After several attempts in the past, Association Heath Plan legislation is picking up momentum. President Bush is supporting the measure, the House has passed legislation for the fourth time and Secretary of Labor Elaine L. Chao has been pushing the measure personally.
“With the new data showing an increasing number of uninsured Americans, Congress has an immediate opportunity to increase access to quality, affordable health insurance,” says Chao last September. “Health care costs are continuing to rise sharply across the United States, and more employers and employees are sharing the burden of increased premiums.”
To be certain, there are many factors in the current health care crisis: soaring medical costs, limits on access, consumer demand for the best treatment, malpractice litigation and various other economic influences. Yet, proponents of association health care plans say that finally small business — which generate the most new jobs — will be able to enjoy the same economies of scale that big business and organized labor have enjoyed for years. While no magic bullet, allowing associations to offer plans to their membership is seen as one way to reduce costs anywhere from 8 to 25 percent and allow better controls on coverage. To some, this may be the last exit from the road to universal health care.
“We’re heading towards a crisis here,” says Craig Brightup, vice president of government relations for the National Roofing Contractors Association. “If we want to preserve and make better the private sector ... this legislation is necessary. If [we] aren’t given a break here ... I think that we’re kind of setting ourselves up for a perfect storm.”
Through the RoofLike other business, roofing contractors are experiencing enormous increases in health insurance coverage and many are passing along more of the cost to employees. According to a study by the Department of Labor, 24 percent of small businesses that employ low-wage workers offer health plans, compared to 88 percent of their counterparts in big business. One reason for that discrepancy is the ability for large employers to offer health plans because of their bargaining strength and administrative efficiencies. They — and Taft-Hartley unions — are also largely exempt from the many insurance coverage requirements passed over the years by state legislatures.
While the idea was to force insurance companies to address changing societal needs, the idea of mandated hair transplants for chemotherapy patients doesn’t sit well in a climate of anti-regulation. According to Joe Rossmann, vice president of Fringe Benefits for Associated Builders and Contractors, insurance requirements recently passed by the Maryland legislature actually decreased benefits and increased rates for its members. ABC began offering its member companies a health insurance plan in 1957, but had to discontinue it in 2001 because insurance carriers could no longer manage the patchwork of requirements from state to state.
“Nobody in the insurance business at this juncture ... wants to provide insurance for association health plans,” says Rossmann, who stands ready to re-enter the market. “The real advantage is that a bonafide association has the infrastructure to deliver these products and services.”
The legislation currently before the Senate would give associations the same exemptions as labor and big business, while also putting controls in place like financial reporting and rules forbidding discrimination due to existing medical conditions. Associations must be at least three years old, have a sufficient purchasing pool and have financial requirements and reserves certified by the Department of Labor. ABC, which has been deploying its extensive lobbying muscle on this effort for nearly 10 years, estimates that it can save 20 to 25 percent in costs by taking on much of the administration of policies, like claims, marketing and customer service.
Rossmann believes that market forces will provide sufficient coverage to employees rather than the state requirements that seem to have backfired. “You figure most mandated benefits … they’re from private interest groups. They’re not across-the-board items that come from the public,” he says. “We have to offer good benefits to our members in order for them to buy the product. And they want to provide benefits to keep employees.”
Human CostUnlike past arguments for tax incentives or freedom from regulation or assisting small firms, the approach of the current lobbying effort seems to revolve around the large amount of uninsured Americans: 41.2 million, up from 38.7 million in 2000, according to recent U.S. Census figures. An estimated 60 percent of those individuals live in households where the wage earner is employed by a small business.
As more employees share the cost of health insurance, that number is bound to go up, which impacts health care for all Americans. Some argue that those numbers will level off since the impact of small business is already felt, while others feel that increasing numbers of uninsured may compel big business to cut benefits as well. A frightening scenario of massive inequity in the health delivery system with exploding emergency room visits and despair among large segments have framed the argument in more humanitarian tones.
“Association Health Plans would equalize the playing field for small businesses, but more importantly, would result in health insurance coverage for millions of uninsured workers and their families,” said Secretary Chao.
“Tax credits are fine, but they don’t deal with the systematic problem of the uninsured,” says Brightup of NRCA. “This idea of association health plans is not anything radically new. What has happened is that the various state mandates have become so complicated that it's impossible to [manage]. But we know that they work.”
The packages offered by Fortune 500 companies — who can afford to self-insure and reinvest the surplus — are integral to the competitive benefits needed to attract/retain employees and indicate that market forces can contribute to a balanced system. Brightup points out that Rochester, N.Y., is considered a great place to get sick because the high quality health care system is driven by three giant employers: Xerox, Kodak and Bausch & Lomb. He also cites a study by the General Accounting Office that 90 percent of small business health care is controlled by three companies.
NRCA, which has not offered health insurance to its members in the past, does partner with CNA, a private insurer, for workers compensation insurance. The association also tries to facilitate contact between brokers and members, but can’t make the numbers work in order to administrate today’s various benefit packages. Agents have made presentations, but it would take too much to administrate NRCA’s 5000-plus members across the country, most of whom already offer health insurance.
“We’ve tried it before. In the end, it was as frustrating as a Rubik’s Cube,” admits Brightup, who adds that the association is already exploring how to offer a tailor-made package for roofing contractors. “I would hope we would be able to do it within months of the legislation passing.”
Opposition to the measure comes from the insurance industry, which is concerned about competition as well as being forced to adhere to a matrix of benefits. Also, health care advocates claim that benefits will be diluted nationwide; insurance carriers will be more vulnerable because of a fractured market; the accountability of health plans will be reduced; effectiveness of state-mandated benefits will be destroyed; and consumers will be more vulnerable to fraud. The latter has cropped up before in scams like MEWAS, which were essentially front organizations posing as business associations that left many business exposed to enormous health care claims.
Even with many serious matters before Washington, proponents are optimistic they can finally win passage in the Senate and begin to shift more control of health care costs to small businesses and their advocates. The idea is that when business — through the influence of employees — can reduce costs long term, even those outside the system will benefit. It wasn’t long ago that record low unemployment made incentives and benefits a standard in the roofing industry in order to get the work done.
“When you get people in the industry, you have to be competitive with other employers,” says Brightup, who sees benefits as a crucial way to attract good employees. “All we are asking for is to be treated equally and fairly as far as being able to enjoy the same economies of scale.”