For Immediate Release: Tuesday, June 28, 2005 10:00 a.m.

Contact: Frank Conte, Communications 617-573-8050; 8750 fconte@beaconhill.org

Association Health Plans would help small business expand coverage for workers

BOSTON - By permitting small businesses to purchase insurance through association health plans, the Commonwealth could reduce the number of uninsured persons by almost 25,000 and get more than 4,000 firms to offer insurance to their employees.

Recognizing the high cost of health insurance and other challenges facing small businesses, a number of states, including Washington, California and Connecticut, permit small businesses to form purchasing pools. However, Massachusetts currently prohibits the formation of purchasing pools. As a result, small firms may pay on average 13% more than large firms for health insurance. By permitting small firms to join an AHP, the state would help close this gap and expand health care coverage.

Using a model built by its staff economists, BHI found that AHPs in the Bay State would:

• provide coverage to an estimated 10,258 firms, of which 4,273 did not previously offer insurance;
• extend coverage to 83,575 enrollees, of which 24,822 were previously uninsured workers and their dependents;
• reduce the number of uninsured small business employees by 14,687; and
• reduce the burden of uncompensated care by $47.6 million.

The analysis assumes that current regulations regarding community rating and mandated benefits would remain intact. Large businesses that self-insure are currently exempt from these regulations and if the AHP were allowed to be exempt the savings to small employers would be larger, more small business' employees would be insured and the reduction in the burden of the uncompensated care pool would be greater. The plan calls for a centrally administered purchasing pool that would negotiate premiums and that would administer plans for all participating small businesses. Small businesses that join the AHP would see other benefits.

Enhanced bargaining power may help keep premiums down and provide more price stability year-to-year. It would also provide greater choices and improve the state's "health capital" through increased productivity and a healthier work force by an amount ranging from $44.4 million to $88.6 million.

"Nearly 60% of the state's uninsured workers work for small business," notes John Barrett Director of Research at BHI. "By permitting small business to pool risk in the same manner as big business is permitted to do, the legalization of AHPs would level the playing field and make a significant step toward reducing the number of uninsured as well as the burden on the state's uncompensated care pool." The study is available at http://www.beaconhill.org.

Posted on 6/28/05 9:39 AM