Small Business Health Plans harmful

The Health Insurance Marketplace Modernization and Affordability Act (S. 1955) is scheduled for debate this week by the U.S. Senate. Because the bill would not benefit most consumers and could have a detrimental impact on the regional economy, The New England Council urges New England’s senators to oppose this legislation.

The legislation would allow small businesses to band together to form Small Business Health Plans (SBHPs) with the aim of providing cheaper coverage to their employees. While some changes have been made, this bill offered by U.S. Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Michael Enzi, R-Wyo., is an update on earlier attempts to pass Association Health Plans, which Congress has failed to do over the last several years.

While the council, the nation’s oldest regional business organization, certainly supports efforts to reduce the cost of health care coverage for small business employees as well as efforts to reduce the number of the uninsured, this legislation would not effectively achieve either of these goals and New England would be particularly adversely affected if this legislation were enacted.

The proposed legislation would undermine state insurance laws governing access and has the potential to drive up premium costs for small businesses.

The act would pre-empt state rating, benefit and consumer protection laws. For the five out of six New England states that employ community rating, passage of this bill would result in increased premiums and decreased coverage. Because the bill would permit SBHPs and insurers to take into account a person’s health status and allow rating as to age, gender, occupation and other factors, those that are most vulnerable in New England would face the highest costs.

In addition, since SBHPs would be able to rate based on health status, if policyholders get sick, even after they purchase a plan, rates could rise considerably forcing the sick disproportionately into traditional insurance products, driving up the cost for everyone in that pool.

In addition, S. 1955 defines small businesses as having 2 to 50 employees, rather than 1 to 50. This may sound like a minor detail, but this provision has the potential to hit New England particularly hard. Five out of six New England states currently require guaranteed issue of insurance to the self-employed.

Because of the way insurance pools are set up throughout our region, the self-employed would face higher rates under the proposed legislation as they would be left in their state small group pool. Since SBHPs are able to independently pool, they will draw the “good risk” away from the state pools. Those remaining, such as the self-employed, will see rate increases.

At least one New England state has recent experience with a similar law that aimed to reduce the cost of health insurance, but actually had the opposite effect. Last year, the New Hampshire legislature repealed SB 110, which had passed in 2003 and established rating rules very similar to those in the Enzi legislation. SB 110 had the effect of drastically raising small business health insurance costs across the Granite State. Small businesses in New Hampshire were forced to scale back their hiring plans and some considered ending their health insurance plans altogether because health insurance became too expensive.

Since the offending provisions of SB 110 were repealed, it is no longer legal in New Hampshire to discriminate against the sick or based on the location of a business. Additionally, safeguards were put in place to limit drastic price hikes on certain portions of the population.

In trying to address the issues of rising health costs and the uninsured, rather than a one-size-fits-all approach, individual states are best poised to increase access to affordable health coverage given their understanding and appreciation of their own state’s unique circumstances. A number of New England states are actively trying to accomplish providing affordable health coverage for nearly all citizens. A federal solution that takes away the states’ ability to effectively manage health care does not make sense at this time.

The New England Council urges New England’s senators to oppose S. 1955. Unfortunately, despite the good intentions of its supporters, this legislation would end up causing more harm than good.

James Brett is president and CEO of The New England Council.