Snowe addresses crisis in small business health care

By Deirdre Fulton

WASHINGTON – Small businesses are experiencing a health care crisis, Maine Republican Sen. Olympia J. Snowe and a bipartisan group of Senate Small Business and Entrepreneurship Committee members said at a hearing Wednesday.

The cost of health insurance premiums is increasing by double-digit percentages yearly, participants said, and small businesses are being forced to deny employees health benefits as a result.

Snowe, performing for the first time in her new role as committee chairwoman, cited statistics she called “stunning” as evidence of the lack of affordable health care choices. Less than 50 percent of companies with fewer than 50 employees offer health benefits, she said, compared with 97 percent of larger firms. With two-thirds of Americans relying on their employers for health insurance plans, reform is necessary, she said.

Kathie M. Leonard, co-founder and president of Auburn Manufacturing Inc. in Mechanic Falls, shared her story with the panel, calling the health care system under which her company’s insurance premiums have risen from $650 per year to $3,400 over the past 17 years “broken.” For Leonard, whose company makes industrial textiles that save energy and substitute safe textiles for ones made with asbestos, rates have risen at an average of around 25 percent per year, she said.

“Small business finds itself in a hopeless situation with a few grim choices left,” Leonard said. “To drop the benefit entirely, to continue to reduce the benefit as premiums increase or to self-insure,” an option which she noted was feasible only for larger small businesses.

Maine small-business employers testified at the hearing to emphasize their support of legislation Snowe will introduce next week along with fellow committee members Christopher “Kit” Bond (R-Mo.) and Jim Talent (R-Mo.).

Snowe’s legislation would establish association health plans (AHPs), which would afford small businesses the opportunity to make the same bulk purchases of insurance that allow larger firms to get better rates. AHPs would “level the playing field,” Snowe said, by allowing groups of small-business employers to negotiate and purchase as a group.

According to the Labor Department, health insurers usually charge small businesses more per employee. Labor Secretary Elaine L. Chao testified at the hearing, endorsing AHPs as a viable solution that would partially address the large coverage gap affecting about 40 million uninsured Americans.

In Maine, the problem is significant, said Jim Nicholson, chairman of the advisory council to the Maine Small Business Development Centers. Nicholson, voted Maine and New England’s small-business accountant advocate of the year in 2000, said AHPs would help to lower skyrocketing insurance costs in the state.

AHPs would allow “small businesses to get quasi-affordable health care,” he said. “If small businesses could find a way to band together, they would have a tremendous voice,” he added.

When allowed to form groups to purchase health care, small businesses would find the prospect of lower rates and decreased paperwork more attractive, participants at the hearing said. Small businesses would in turn be more appealing for insurance carriers who would be dealing with larger bargaining groups.

AHPs would attack the barriers that prevent small businesses from getting affordable plans, Chao said, referring not only to cost barriers but legal, marketing and fraud impediments as well. Small businesses have been vulnerable to insurance scams in the past when carriers offered extensive coverage for little money and then were unable to make payments when the need arose.

If AHPs are placed under federal regulation, the Labor Department would monitor insurance providers, Chao said. In addition, she pointed out, the legislation’s requirement that only associations in operation for at least three years be allowed to sponsor AHPs wouldremove the risk of illegitimate associations formed solely to market insurance.

Democratic committee members like Sens. John Kerry of Massachusetts and Carl Levin of Michigan) said their primary concern was the possibility of “cherry picking” – allowing AHPs to choose and carry younger and healthier clients under their plans. If this occurred, Kerry said, the “tendency to go for low-risk people” would result in other people paying higher premiums because the “risk pool has been made smaller.”

But Snowe’s press secretary, Dave Lackey, said the legislation specifically prohibits cherry picking. AHPs must offer and provide coverage to all people and cannot discriminate based on health records, he said.

The opposition, which includes major insurance provider Blue Cross Blue Shield, also questioned the Labor Department’s ability to manage and regulate AHPs. Some said state regulation would be more reliable than federal regulation. Chao countered that she was “very confident about resource issues” and that the department already has all the necessary infrastructure to implement the new programs.

According to Lackey, Snowe is optimistic about the bill despite the opposition. She is encouraged by the willingness of the opposition to engage in debate, he said, because they “don’t think that their objections can’t be met.”

Published in The Kennebec Journal and The Morning Sentinel, in Maine.