July 25, 2005
We write to urge you to oppose the Small Business Health Fairness Act (H.R. 525), which would exempt Association Health Plans (AHPs) from state law and regulation. We agree that small employers and their workers face enormous difficulties in the health insurance market. But removing state oversight of these plans, including the application of state patient protections and solvency standards, is not the answer.
Exempting AHPs from state regulation would further fragment the small business health insurance market, segregating the risk pool of younger, healthier individuals from the risk pool of families seeking more comprehensive coverage. As a result, the healthier group covered by AHPs with skimpy coverage would see their insurance costs decrease, but many more workers, who need traditional plans, would see their costs rise. An analysis by the Congressional Budget Office (CBO) concluded that 4.6 million would indeed experience premium reductions. But CBO also concluded that 20 million small business workers and their dependents would see the cost of their premiums go up.
H.R. 525 would also exempt AHPs from patient protections enacted by states, including cancer screenings, diabetes care, mental health services, maternity care, direct access to emergency care and many other protections. The failure to enact a federal patient bill of rights should not be compounded by removing protections that states have established.
Exempting AHPs from state solvency standards would expose workers to a much greater risk of fraud and abuse. H.R. 525 would replace state requirements for independent audits with federal rules allowing AHPs to self-certify solvency. State requirements for adequate funds to pay claims would be replaced with a low federal capital requirement of only $2 million, regardless of the number insured.
The failed experiment with Multiple Employer Welfare Arrangements (MEWAs), which Congress exempted from state regulation in 1974, is instructional. Because of MEWA failures that left at least 398,000 consumers with $123 million in unpaid claims, Congress was forced to repeal the MEWA exemption and restore regulatory authority to the states. More recently, media reports have documented the failure of a number of association-type health plans over the last several months. Collectively, these plan failures have left over 100,000 consumers with more than $30 million in unpaid bills. Replacing state oversight with inadequate federal oversight will lead to even more failures and a growing number of consumers and providers left with unpaid bills.
We agree that there is a critical need for solutions that will enable small business employers and their workers to have access to affordable health care coverage. But proposals that would exempt AHPs from state oversight would exacerbate existing problems. We urge you to oppose H.R. 525.
American Federation of Government Employees
American Federation of State, County and Municipal Employees
American Federation of Teachers
Communications Workers of America
Department for Professional Employees, AFL-CIO
International Association of Machinists
International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths,
Forgers and Helpers
International Brotherhood of Electrical Workers
International Brotherhood of Police Officers
International Brotherhood of Teamsters
International Longshore and Warehouse Union
International Union, UAW
International Union of Bricklayers and Allied Craftworkers
National Association of Government Employees
Service Employees International Union
Transport Workers Union of America
Transportation – Communications International Union
United Food and Commercial Workers International Union
United Mine Workers of America
Union of Needletrades, Industrial and Textile Employees/Hotel Employees
and Restaurant Employees International Union