Association Health Plans: Legislation in the 109th Congress

Publication Date: May 2005

Publisher: Library of Congress. Congressional Research Service

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Research Area: Health

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Abstract:

An estimated 45 million people were without health insurance in 2003. The number of uninsured has risen in almost every year since 1989 and is expected to continue its rise in the near term. Most people in the U.S. who have health insurance obtain it through their own, or a family member's, employer as a workplace benefit. Small employers, however, are far less likely than larger employers to provide health insurance to their workers and almost half of the uninsured work for, or are family members of employees who work for, small employers.

Legislation considered by the 109th and earlier Congresses is intended to assist small employers in offering health insurance as a benefit to their workers. The Small Business Health Fairness Act of 2005, introduced in the House as H.R. 525 and in the Senate as S. 406, include provisions that would create new groups called Association Health Plans (AHPs) for small firms to join into to offer coverage to their employees.

Association health plans would build on existing groups already available to some small employers -- many trade and professional associations offer health insurance to their members. The bills would create incentives for association-based coverage while also establishing a set of rules and requirements for associations wanting to take advantage of the benefits the legislation offers. The goals of AHPs include reducing the administrative challenges for small employers in seeking out, contracting with, and administering health benefits. AHPs are hoped to provide small employers with the bargaining power that larger employers have in negotiating contracts with insurers. In addition, AHPs may be able to offer reduced priced plans, thereby enabling more employers to afford to offer such coverage. Reducing the number of small firm workers without access to health insurance is another goal that has often been offered for pursuing expanded group purchasing options.

Opponents of the AHP approach raise concerns that unintended negative consequences would arise, negating the benefits that the new groups would create. This concern largely relates to fears that AHPs would increase risk segmentation in the small group market for insurance by covering mostly healthy groups, leading to increased instability and higher premiums for other small groups.

While the proposed AHPs are not likely to immediately undermine the small group market, they are likely to require additional features to significantly expand insurance coverage among the uninsured. Some policy advocates propose combining legislation intended to improve pooling for small groups with cash subsidies or tax credits or with seed money for states to improve the effectiveness of such entities in helping small employers access health insurance. Bills offering such alternative approaches are briefly summarized. This report will be updated periodically.