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Support for Small Business Health Coverage Solutions Fragmented

APRIL 6, 2006 -- The lack of consensus over how to make health coverage affordable for small businesses was as clear at a Senate hearing Thursday as the growing pressure members of Congress feel to deliver on the issue.

Senators made passionate pitches for different solutions. Business officials testifying at the hearing by the Senate Finance Committee were similarly out of sync. Insurance market researchers voiced strong criticisms of the small business coverage bill (S 1955) that has progressed farthest in the Senate.

And the senator who chaired the hearing, Iowa Republican Charles E. Grassley, was noncommittal about what should be done for small businesses, saying he will continue to hold hearings on rising health costs and coverage of the uninsured.

So if forces are starting to coalesce to push S 1955 across the finish line in Senate floor action expected in early May, it wasn't apparent from the Finance panel's review of the issue.

Sen. Olympia J. Snowe, R-Maine, an early champion of legislation allowing small businesses to join "Association Health Plans" (AHPs) to buy coverage, declared that "the time for talking has long since passed. No more excuses, no more laments, no more complaining, no more describing a problem and doing nothing about it."

"Even when study after study confirms beyond a doubt that fewer and fewer small businesses are able to offer health insurance to their employees, little has been done to alleviate the problem," Snowe said. "Quite simply, that's outrageous."

But Snowe did not say that she would support S 1955, a modification of AHP legislation she had introduced. Sponsored by Sen. Michael B. Enzi, R-Wyo., and approved by the Senate Health, Education, Labor and Pensions Committee, S 1955 would allow small employers to band together in "Small Business Health Plans" to buy less-regulated coverage.

Snowe called the bill "a good step forward" but voiced several criticisms, including its failure to allow small businesses to join together to self insure, a step that would exempt them from state regulation.

Reading from prepared remarks, Sen. Blanche Lincoln, D-Ark., appeared to connect with witnesses and the hearing room audience with an emotional statement advocating a bill (S 2510) creating a nationwide purchasing pool for small businesses.

"The small business health care crisis is undoubtedly the number one issue I hear about when I am traveling in Arkansas, and I have been working hard on a solution," she said. "Small businesses are the number one source for jobs in Arkansas, yet only 26 percent of businesses with fewer than 50 employees offer health insurance coverage."

The approach in S 1955 would preempt mandates that protect consumers in Arkansas and provide them with meaningful coverage, she asserted. "Mandates like coverage for maternity care and newborn coverage, diabetes supplies, children's preventative health care and mental health disorders would all be pre-empted," she said.

Also sponsored by Sen. Richard J. Durbin, D-Ill., the Lincoln bill would create a Small Employers Health Benefits Program along the lines of the Federal Employees Health Benefits Program. The large pool would allow the costs of more sickly workers to be offset by premium contributions of healthier ones, making coverage more affordable for those with chronic and other diseases, backers say.

In addition, the bill would provide $50 billion in tax credits over 10 years to help small businesses pay the costs of coverage. Spending $50 billion over 10 years to cover 20 million uninsured people "seems somewhat reasonable," Lincoln said pleadingly.

But Joseph E. Rossmann of the Associated Builders and Contractors, Inc., said S 1955 "is the most viable proposal currently before the U.S. Senate," adding that it would be run by the private sector (the SEHBP would be overseen by the federal Office of Personnel Management) and would reduce premium costs by 12 percent for members of Small Business Health Plans.

"Adverse selection that currently exists in state markets will be greatly reduced when younger, healthier workers employed in small businesses who are now uninsured are able to obtain coverage that is affordable," he said in written testimony.

And Sen. Jim DeMint, R-S.C., also urged against involving government, saying that if one is honest about many of the problems society is having today, "it comes back to government." Tax breaks to ease the costs of purchasing health savings accounts would "turn patients into shoppers," increasing access to coverage by making it more affordable, he said.

But Sen. Max Baucus, D-Mont., said, "I'm not sure the individualist ethic can be cleanly extended to health insurance. The nature of health insurance is shared risk. We all pay into the pool. And we benefit from the pool when we need help."

Similarly, the importance of having a large pool mixing sick and healthy people and of having "a fair sharing of health care costs" drew support from the National Small Business Association, which says it represents some 150,000 small businesses.

Business Support for a Mandate
"Broad reform" is necessary, said Todd McCracken, NSBA president. He said his association backs an individual mandate requiring everyone to have health coverage. Subsidies should be created to help everyone afford it, he added. That's the approach Massachusetts is taking in legislation approved Tuesday by state legislators.

Len Nichols, a health policy analyst with the New America Foundation—a self-described non-partisan group that says it advocates new thinking to address complex policy challenges—said S 1955 "is manifestly about helping some at the expense of others." The health plans it would create would bring down costs for healthier small business employees while driving them up for sicker employees, he said.

Linda Gibbs, deputy mayor of New York for Health and Human Services, voiced similar concern that S 1955 would fragment the insurance pool. Gibbs said in a letter to Grassley distributed at the hearing that under the bill "New York City's small businesses could see their already significant costs for health insurance increase to the point where very few small businesses would be able to afford it."

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