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Small Business Reform Bill Blocked

On May 11, the Senate blocked the Health Insurance Marketplace Modernization and Affordability Act of 2006 (S 1955), also known as the Enzi bill. The bill would have helped small business join together to create association health plans, giving them greater purchasing power to negotiate affordable premiums and achieve administrative efficiencies. The Enzi bill also would have allowed insurers to preempt state laws that mandate inclusion of certain benefits and limit premium variability between small businesses. [1] Serious concerns were raised by states, which helped derail the bill. But bill sponsor Mike Enzi (R-Wyoming) said he would work with Democrats in an effort to bring a compromised bill up for vote later this year.

The primarily Republican proponents estimated that over 1 million people would gain insurance coverage as a result of lower premiums. However, the bill would allow insurers to offer plans that don't cover benefits required by some states, such as screenings, diabetes supplies and education, mental health parity, and drug abuse treatment. Also, it would allow greater premium variation that could result in as high as a 26:1 ratio between premium rates based on individual health conditions, business size, and other factors, according to Mila Kaufman, associate professor at the Health Policy Institute of Georgetown University. [2] Such a disparity could potentially price-out sicker workers from purchasing insurance. Numerous groups, including the AARP and the American Cancer Society, opposed the bill, along with 41 state attorney generals.

Given the interest, need, and financial difficulties associated with health coverage among small businesses, along with Senator Enzi's interest in working with Democrats on a compromise, it is likely that small business reform will continue to be a focus in Washington. For example, a bill sponsored by Senator Durban (D- Illinois), The Small Employers Health Benefits Program Act of 2006, would allow small businesses with up to 100 employees to join together for lower health care prices by pooling their purchasing power and spreading their risk over a large number of participants, while maintaining state mandated benefits.

There will be much at stake for states in this debate, especially if state regulations are preempted (as in S 1955). The potential for additional businesses to purchase coverage would need to be weighed against potential negative consequences, such as sicker people being priced out of the market or individuals having inadequate insurance protection, which would add stress to states' safety net and public coverage programs.

[1] With the caveat that they would have to offer a plan with the same benefits as a state employee plan in one of the five most-populated U.S. states: California, Florida, Illinois, New York, and Texas.
[2] Kaufman M, Pollitz K. Health Insurance Regulation by States and the Federal Government: A Review of Current Approaches and Proposals for Change. Georgetown University Health Policy Institute, April 2006.

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