Senator Michael Enzi from Wyoming has long worked to pass legislation that provides a more affordable health plan alternative to small businesses. In previous years he sponsored legislation to allow small employers to band together and form self funded Association Health Plans (AHP). But he ran into opposition from consumer groups and the insurance industry that felt his proposal was not giving consumers adequate protection. Self funded plans are beyond the scope of state insurance regulation under ERISA’s preemption provisions found at 29 USC §1144(b)(2)(B). Some folks rightly felt that encouraging small employers to set up self funded plans was unwise.
I agree that fostering self funded plans for small employers, even when they group together as AHPs, is a very bad concept. I’ve dealt with a disproportionate share of inadequately funded and incompetently administered small self funded plans. AHPs were sheep waiting to be sheared by unscrupulous third party administrators, fiduciaries and stop loss insurers. Of course, the real losers in that situation would have been the employees and their family members who would have counted on receiving health benefits only to be left holding the bag. ERISA, standing alone, without the additional help of state insurance regulations and case law, gives consumers who are cheated out of their benefits by unscrupulous plan fiduciaries about as much protection as an umbrella in a hurricane.
So Senator Enzi retooled. A couple of days ago he unveiled the Health Insurance Marketplace Modernization Act of 2006 that contains the Small Business Health Plan (SBHP) initiative. This proposed bill addresses some of the concerns of consumer and insurance groups about the old AHPs. It requires that small businesses who form health benefit plans under the bill do so only by purchasing group coverage through licensed insurers, thus subjecting the SBHP to state insurance regulation. To provide cost savings, it allows SBHPs to slide around some of the mandated benefits that various states require of insurers and that, to some degree, increase the expense of health insurance. It requires insurers of SBHPs to accept all applicants regardless of health history and caps the amount the insurers can write up the premiums to levels set by the National Association of Insurance Commissioners, 25% above the base rate for the initial year and 15% per year after that. Finally, it establishes a "harmonization" board that will work to create greater uniformity among the various state’s rate structures and form filing procedures.
It’s an interesting concept and what little information I have about it is that Senator Enzi has worked to accommodate the primary interests of the parties that have been at odds in past years. Will it get through Congress? Time will tell. I’ll post updates as they become available.