Business finance small solution

Anne Valentine, a small business owner from Portland, Maine, worries that the rising cost of health care thwarts her power to reward her terrific staff.

"It's a cost whose growth outstrips my business's ability to catch up. You never get out in front of it," Valentine recently told the Senate Committee on Small Business and Entrepreneurship.

Small employers from New Hampshire to New Mexico share Valentine's concern. So when the Bush administration ran a solution to their problem up the flagpole on Capitol Hill Feb. 11, more than 100 powerful business groups saluted it--but significant insurance industry stakeholders withheld their praise.

The Bush proposal, the Small Business Health Fairness Act (H.R. 660) would allow small employers to band together and swing the clout of their numbers toward negotiating sweeter deals with insurers. Pooling their resources across state lines, the associations would be subject to federal oversight, but not to regulation on the state level, and would receive none of the consumer protections and required benefits that come with state regulation. And that's why opponents say it's a bad idea.

But supporters stressed the problems the bill would fix. "Forty-one million Americans currently have no health coverage at all, and 85 percent of them are from working families," said House bill sponsor Rep. Ernie Fletcher, R-Ky. "The Small Business Health Fairness Act can reduce the high cost of health insurance for small firms, who deserve the opportunity to obtain high quality health insurance that's competitively priced," Fletcher said.

"If a health plan is good enough for Wal-Mart, it ought to be good enough for the local hardware store owner," said Ed Frank, a spokesman for the National Federation of Independent Business (NFIB), a prominent small employer group. The NFIB joined big-business powerhouses like the U.S. Chamber of Commerce (Chamber) and the National Association of Manufacturers (NAM) in support of the bill.

"Just like buying a case of soda at a supermarket costs less per can than buying 24 individual cans at a vending machine, AHPs [association health plans] would allow groups to buy thousands of policies at a lower cost and pass the savings along," said Frank.

"But you can't construct a giant by putting a bunch of midgets on each others' shoulders," countered Larry Akey, a spokesman for the Health Insurance Association of America (HIAA). The HIAA, a powerful insurance group, broke with its natural allies, the NAM and the Chamber, in expressing serious misgivings about what the bill would do.

"Our biggest concern is that AHPs would wreak havoc on the small group marketplace because they would draw off the healthier, younger [employees], leaving behind the sicker, older ones," said Akey. "The expected cost savings with the AHPs is that they wouldn't have to provide the mandated benefits required by state law," he added.

DIANE CADRAIN IS AN ATTORNEY AND HAS BEEN COVERING WORKPLACE LEGAL ISSUES FOR 20 YEARS.