Association Health Plans are not the answer to rising health insurance costs

Mar 6, 2003

WASHINGTON, D.C. – Small employers are facing enormous year-over-year health insurance premium increases and workers in small firms and their families comprise 60 percent of the working uninsured. Though the organizations that make up SBCEHI support swift and effective healthcare reform, we believe reform should bring long-term stability, keep costs in check and be fair to all small businesses and their employees.

Association Health Plans (AHPs) will not solve the healthcare crisis and will allow national associations to circumvent current state health insurance regulations. SBCEHI believes that AHPs are a reaction to the dire circumstances small businesses face in the health insurance arena, and are not a long-term solution.

AHPs may worsen the market segmentation and risk-aversion that currently characterize the small group health insurance market, and which are at the root of the small business health care crisis. The basic premise of AHPs is that pooling on the part of small businesses would increase purchasing power and lead to lower premiums. However, the health insurance market places the emphasis on the makeup and location of that pool versus the size of the pool. For example, a pool of 1,000 people with an average age of 40 could demand a much better rate than a pool of 50,000 people with an average age of 55. Two-thirds of the cost benefit of AHPs resides in risk selection acording to a Congressional Budget Office report.

SBCEHI believes it is time to coalesce around a proactive agenda for reform in the health care market and not rely on a system that, in the long run, encourages increased Federal regulations.

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