Small Business Focus: Health plans for small business possible through associations

Published 12:00 am Friday, October 18, 2002


The next time you drop off that bundle of laundry at your dry cleaner or eat at your favorite neighborhood restaurant, ponder the possibility that those who serve you have no health insurance. Imagine them being vulnerable to the random misfortunes of life.

That cheery employee or owner of the business who greets you at the counter may just be one of 39 million U.S. citizens who don’t have a smidgen of health coverage, a group that grew by eight million in just the last decade. Six out of 10 of those are small-business employees and their families.

The disparity is stark. Among those companies with fewer than 50 employees, less than half were even offered health benefits, while nearly all – 97 percent – of larger firms were able to cover their employees, according to 1999 statistics.

Cost is the biggest obstacle preventing small employers, especially those with low-wage employees, from offering health protection. Insurers typically charge Main Street firms more per employee for comparable coverage than they assess larger companies.

Another hurdle is erected by states, which mandate that group health policies contain certain benefits: sometimes as many as 30 or more medical procedures and treatments prescribed by health professionals. And in some states, insurance is available to small businesses only through a state-operated risk pool or from a single insurance carrier.

It’s no wonder that among big insurers there’s a “why bother?” attitude that thwarts negotiation. Most small entrepreneurs can’t wrangle favorable insurance terms because they don’t represent the large number of policies that make the carriers’ mouths water.

It is difficult to imagine that such a situation exists in a world where hardly a day goes by without major announcements of medical technology advances or the creation of new, life-saving drugs. Unfortunately, special-interest groups, mainly large insurance companies, have successfully blocked the path to those much-needed benefits for small businesses.

But the myths and mis-statements used by the special interests were exposed recently when Labor Secretary Elaine Chao and several leaders in Congress unveiled a government study proving that Association Health Plans could provide small-business owners and their employees with more affordable, quality health insurance.

AHPs would allow small businesses to band together through trade and professional associations to purchase more affordable health benefits. This way, small employers would have greater purchasing power, gain economics of scale and benefit from administrative efficiencies. These plans would give participating small firms the same advantages already enjoyed by big labor and big business.

For years, phony claims that such initiatives would be misused by the nation’s emerging entrepreneurs have been perpetuated. But the Labor Secretary says if health legislation already passed by the U.S. House of Representatives were to become law, the benefits would far outweigh the concerns.

More importantly, millions of vulnerable small-business owners and their employees would no longer be exposed to the randomness of fate. They, like their counterparts in larger enterprises, could come to work secure in the knowledge that they have the protections they deserve.

JACK FARIS is president of the National Federation of Independent Business, the nation’s largest small-business advocacy group.