Issue
Should small business health plans (SBHPs) be regulated under federal standards similar to the manner that employer-sponsored group health plans are regulated under the Employee Retirement Income Security Act (ERISA).
Background
A small business health plan (SBHP) is an arrangement where employers band together as part of a bona fide trade or professional association to provide health benefits to employees and their dependents. Currently, such arrangements may qualify as ERISA plans, but are subject to state regulation.
Bringing SBHPs under federal standards and regulation would allow these plans to be either fully-insured or self-insured and would permit them to operate across state lines in accordance with uniform federal rules, including strict solvency standards.
Supporters believe federal regulation of SBHPs would build on the successful ERISA framework that has contributed to affordable health care coverage under private plans for more than 150 million Americans. They believe small employers could gain economies of scale, greater purchasing clout and administrative efficiencies, thus leveling the playing field with larger competitors. As a result, supporters believe there will be vast improvements in the availability and affordability of health coverage, which will lower the number of uninsured people.
Opponents believe federal SBHP regulation would undercut state small group reform programs and would fragment the state regulated insurance market. They believe that market segmentation which would result from the incentives for SBHPs to select healthy groups could destabilize small group insurance markets. They also believe states rather than the federal government should regulate association health plans.
SIIA Position
SIIA believes pooling arrangements utilizing SBHP’s can provide coverage to small employers in a more efficient and cost-effective manner, allowing them to take advantage of risk financing options utilized mainly by large employers.
Supporters/Opponents
SBHP supporters include: National Association of Manufacturers, National Federation of Independent Businesses, SIIA, and U.S. Chamber of Commerce. AHP opponents include: NAIC, National Governors Association, and Blue Cross/Blue Shield Association.
Status/Outlook
In the 109th Congress, The Small Business Health Fairness Act of 2005 (H.R. 525) passed the House by a vote of 263 to 165. The Senate failed to act on the counterpart bill (S 406) sponsored by Senator Olympia Snowe (R-ME). On January 5, 2007 Rep. Sam Johnson (R-TX) re-introduced the House bill (H.R. 241 in the 110th Congress). Also in the 109th Congress, the Senate Health, Education, Labor and Pensions committee passed S 1955 sponsored by Senator Michael Enzi (R-WY). S 1955 does not included self-insurance provisions. The Senate bill has not been introduced in the new Congress. President Bush announced support for SBHP legislation in the State of the Union address.
