Americanmachinist 2929 Freedenbergpng00000002431
Americanmachinist 2929 Freedenbergpng00000002431
Americanmachinist 2929 Freedenbergpng00000002431
Americanmachinist 2929 Freedenbergpng00000002431
Americanmachinist 2929 Freedenbergpng00000002431

Making healthcare coverage less onerous

March 1, 2005
By Dr. Paul Freedenberg Vice President Government Relations AMT—The Association For Manufacturing Technology

By Dr. Paul Freedenberg
Vice President Government Relations
AMT—The Association For Manufacturing Technology

New legislation promises to significantly reduce costs for small and medium-sized companies offering employee health insurance. On February 2, Congressman Sam Johnson (R, Tex.) and colleagues from both parties introduced the Small Business Health Fairness Act (H.R. 525). It would let trade associations offer health insurance to the employees of their member companies in all 50 states.

A similar bill has passed the House two times before, each time to die in the Senate. But this time, it seems to have a reasonably good chance of passage thanks to a strong Republican majority in both Houses and with the support of the President.

The legislation would create association health plans (AHPs) that would let small businesses band together through their trade associations to purchase quality healthcare at a lower cost than they now pay. The AHP bill would increase the leverage of small and medium-sized companies and should lower their overhead costs as much as 30%. It would also free them from costly state-mandated benefit packages. These are advantages and economies of scale that large corporations and unions now enjoy.

Frequently, small companies have a limited number of insurance providers in their state or region. AHPs would dramatically increase options as well as leverage. This has not gone without notice by those who would lose leverage and control. In the past, large health insurance companies, state insurance commissioners, and even some governors have opposed this legislation. But the hope is that this time will be different.

With healthcare costs spiraling out of control, there are a lot more allies and some strong arguments in favor of passing this legislation. It has been pointed out that a significant majority of Americans without healthcare coverage work for small businesses. That number is likely to grow unless some way is found to make healthcare coverage affordable, which is precisely what this bill promises.

The White House points out that American citizens use the Internet or 800 numbers to shop anywhere for anything. But different rules apply to health insurance. Individual consumers (or individual companies acting on their behalf) can only purchase health insurance in the state in which they live and can't shop around for a better deal elsewhere. This legislation empowers the American consumer to make the best choice for himself and his family — a hard argument for opponents to counter.

Am I optimistic? Yes. But this is by no means a sure thing. There is a long fight ahead, with a number of roadblocks likely to be set in our path by the opposition.

Finally, I would note that even if the legislation creating nationwide AHPs is passed this year, it is likely to be many months — possibly more than a year — before insurance companies begin to offer the policies envisioned in the legislation. Even then, such policies are likely to come under duress. But that is the beauty of the marketplace. It will force the creation of AHPs, once we have the proper legislation in place.