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U.S. Department of Labor
Employee Benefits Security Administration
April 2005
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Printer Friendly Version
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AHPs will offer valuable benefits to small employers and
their workers. AHP legislation pending before Congress will provide small
businesses and other association members the opportunity to band together
through trade and professional associations to purchase affordable health
benefits, giving them the greater bargaining power, economies of scale, and
administrative efficiencies currently enjoyed by large employer and union
plans. AHPs will level the playing field and provide greater access to
health insurance for workers.
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Lower Costs: CBO has estimated
that small businesses obtaining insurance through AHPs save an average
of 13%, and as much as 25%, on premiums.
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Increased Coverage: CBO
estimates that the number of insured small firm employees and dependents
could increase by as many as 2 million.
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EBSA Can Do the Job: EBSA
currently administers ERISA, protecting approximately 2.5 million
private, job-based health plans and 135 million workers, retirees and
their families. Of these, 300,000 plans covering 78 million individuals
are self-insured, and therefore are subject exclusively to EBSA
oversight.
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No Cherry-Picking: Both the
House and Senate bills include numerous provisions designed to ensure
that AHPs pool together a diverse range of health risks to prevent AHPs
from “cherry picking” the healthiest workers.
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No Exclusion for Previous Claims:
The legislation makes clear that AHPs will have to comply with HIPAA,
prohibiting group health plans from excluding high-risk individuals with
high claims experience. AHPs must offer all available options to all
employers and individuals in the association.
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Fair Premiums: The legislation
limits AHPs’ ability to vary the premiums of lower and higher-cost
employers.
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Strong Protections Against Fraud:
Only bona fide associations, which are in existence for three years for
purposes other than providing health insurance, can operate an AHP. A
self-insured AHP must represent a broad cross-section of trades and
businesses or industries. AHPs must offer coverage only to employers and
individuals with specified, meaningful connections to the association.
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Preserves States’ Insurance
Protections: The AHP legislation preserves important traditional
state prerogatives to regulate the business of insurance, ensuring that
insurance policies purchased by AHPs will still be subject to state
solvency standards and rating rules; important consumer protections such
as prompt pay laws, external review, and marketing guidelines; and
disease specific benefit requirements of the state where the policy was
initially approved.
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Effective Enforcement: There
will be little risk of fraud in AHPs. The Department will allocate the
resources necessary to effectively oversee AHP’s conduct. AHPs must be
sponsored by bona fide associations, governed by independent boards, and
certified by the Department as meeting the strong solvency and other
protections in the legislation before offering benefits to a single
worker. The Department would monitor the finances of self-insured AHPs,
and could shut down any problem AHPs early, so no benefits would be
lost. In addition, by providing quality, affordable insurance, AHPs
would reduce the vulnerability of small businesses to fall victim to
insurance fraud.
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Bipartisan Support: In the
108th Congress, the House of Representatives twice passed the
legislation with strong bipartisan support. In the 109th Congress, the
bill has been reintroduced on a bipartisan basis in the House, and will
likely be passed by the House in the next few months. The bill has also
been introduced in the Senate, where it has been cosponsored by a
bipartisan group of Senators, including Small Business Committee Chair
Snowe (R-ME) and Appropriations Committee Ranking Member Byrd (D-WV).
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This fact sheet has been developed by the U.S. Department of Labor, Employee
Benefits Security Administration, Washington, DC 20210. It will be made
available in alternate formats upon request: Voice phone: 202.693.8664;
TTY: 202.501.3911. In addition, the information in
this fact sheet constitutes a small entity compliance guide for purposes of
the Small Business Regulatory Enforcement Fairness Act of 1996.
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