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NSBA releases Mercer Report on long-tem negative effects of AHP legislation
Jun 10, 2003

FOR IMMEDIATE RELEASE

REPORT: Impact of Association Health Plan Legislation on Premiums and Coverage for Small Employers

WASHINGTON, D.C. – Health insurance costs would increase by an average of 6 percent overall in the small-business market and the number of uninsured would increase by over 1 million if federal Association Health Plan (AHP) legislation were enacted, according to a study released today by National Small Business United (NSBU).

The study, “Impact of Association Health Plan Legislation on Premiums and Coverage for Small Employers,” by Karen Bender FCA, ASA, MAAA and Beth Fritchen FSA, MAAA of Mercer Risk, Finance and Insurance is the most extensive study yet on the effects of AHPs on the small-business health insurance market.

The Mercer study looks at the effects of AHPs over a four-year period and shows that the pricing advantage of AHPs is gained through risk-selection, not administrative efficiency.

“The potential savings of AHPs is attributed to relief of mandated benefits and risk-selection,” said Bender. “This risk-selection is through plan design, rather than outright discrimination.”

According to the study, AHPs are expected to reduce premiums by an average of 10 percent for their participants, but the state-regulated market would incur price increases of an average of 26 percent, resulting in an overall average increase of 6 percent for the small-business market.

“Common sense tells us the more regulated the state market, the more adversely the premiums in that market will be impacted by AHPs,” said Bender. “The unintended consequence is that the number of uninsured will go up as premiums increase in the regulated market.”

“We have no doubt that AHP proponents sincerely want to help small firms,” said William Lindsay, Chair of NSBU. “But, the unintended consequences would be catastrophic.”

“This study spells out why AHPs represent such a grave threat to millions of small firms struggling to offer health insurance,” said Todd McCracken, President of NSBU.

AHP legislation would allow national trade associations to offer health insurance to members under the Employee Retirement Income Security Act. These plans could be offered across state lines without being subject to state rules and oversight.

The study is available in PDF format at www.nsbu.org.

Notes:
Association Health Plan legislation is H.R. 660 and S. 545.
FSA: Fellow of Society of Actuaries
FCA: Fellow of Conference of Consumer Actuaries
ASA: Associate of Society of Actuaries
MAAA: Member American Academy of Actuaries

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