Small businesses struggling with health-care costs could gain new bargaining power with insurers, after a controversial bill passed the House, 82-32.
Senate Bill 86, which passed Wednesday, Aug. 7, would broaden access to association health plans, allowing small businesses to band together when negotiating with insurers and deciding on health coverage. It’s a controversial solution. The bill’s sponsors sold it as a way to liberate small businesses from crushing costs, but critics in the House argued it would weaken Obamacare, drive up premiums in the small group market, and provide substandard coverage.
“Over the last few years, the cost of health insurance has risen dramatically,” N.C. Retail Merchants Association President Andy Ellen said. “We’ve talked to realtors who have them for their family and one employee, the cost is running over $2,000 a month post-tax. That’s health care disposable money that they can’t use to reinvest into their business or use to increase wages.”
Small business owners say the cost of health care is bleeding them dry, sometimes preventing them from affording health insurance at all.
“No one on my team can afford health insurance, and my own grandfathered-in health insurance plan is being done away with by the end of this year,” realtor Wendy Harris said. “This is very personal to me. … Our members need an option for association health plans, for affordable, accessible, quality health-care coverage.”
S.B. 86 is part of the legacy of the Affordable Care Act. The ACA broke the health insurance market into two segments: small group market, for employers with two to 50 employees, and large group markets, for employers with more than 50 employees.
Small businesses complain shopping on the small group market drives their premiums sky-high, as it limits their bargaining power and adds extra regulations.
They look to association health plans as a solution. Under these plans, they could get into the large group market using the umbrella of an association, where they could bargain with insurance companies as a collective rather than as individuals.
But the legal status of association health plans is uncertain. The ability of associations to act as multi-employers hinges on President Trump’s executive order relaxing regulations on association health plans in the first place. That order has been challenged in court.
“Why are we debating this today?” Rep. Darren Jackson, D-Wake, said, pointing to the uncertainty surrounding the plans’ future.
Association health plans have had a checkered history. Association health plans faced a series of scandals, ranging from fraud and insolvency to the rise of bogus entities in the early 2000s.
In an attempt to protect small businesses, the bill imposes requirements on the associations looking to provide insurance. To qualify, applicants must be nonprofit, statewide associations that have existed for at least three years and serve a purpose other than providing insurance. They must have at least 500 individuals and maintain a minimum net worth equal to at least one month’s premium.
“The plans that could be created by this bill are not the association health plans of the past,” Rep. Brian Turner, D-Buncombe, said. “These AHPs must cover pre-existing conditions, they have strict solvency standards, and they are bound by the same laws, rules, and regulations as any other large group plans in N.C. And they will be regulated by the [Department of Insurance]. At the end of the day, associations work for the benefit of their members. That is what they do. And I expect that the plans that will be offered will reflect that.”
Critics worry the bill would siphon people out of Obamacare exchanges, driving premiums up for those left in the small group market.
But the main debate was waged over the health insurance regulations known as Obamacare’s 10 essential benefits.
Once employers move up to the large group market, regulations requiring them to cover those essential benefits lift. Large-group employers aren’t required to cover emergency services, hospitalization, prescription drugs, laboratory services, maternity and newborn care, pediatric services, ambulatory patient services, mental health and substance use disorder services, rehabilitative and habilitative services and devices, and preventive and wellness services.
Proponents say that this flexibility allows associations to lower costs by eliminating unneeded services, but critics say it allows associations to skimp on coverage.
“I used to be a small business owner, I was a franchise operator for several years. I know what it’s like not to be able to provide that insurance,” Rep. Carla Cunningham, D-Mecklenburg, said. “But when I was able to provide insurance, I had to look at what that insurance was actually going to provide for my employees. I wanted them to have the same type of health care I was able to have. I believe that we are compromising too much in the bill.”
Cunningham put forth an amendment to add the essential 10 benefits to the bill, but that effort failed.
“This is a different way forward for employer groups who are struggling to give employees any kind of affordable benefit whatsoever,” Rep. David Lewis, R-Harnett, said. “These plans are different, unique, designed for employers to come together and offer something, because something is better than nothing.”
It’s likely, however, that association health plans will cover most of the essential 10 benefits, says Jordan Roberts, John Locke Foundation health-care policy analyst.
“They can get the same plans, but it’s a lot cheaper because of administrative efficiencies and because they can use their bargaining power to get lower rates,” Jordan Roberts said. “They just get treated as a large group instead of a small one or an individual.”
Behind these worries, the contest over Medicaid expansion was ever-present.
“With the tight job market, it’s difficult to recruit and retain employees without providing benefits like health insurance,” said Greg Adams, who owns two Piggly Wiggly grocery stores. “This bill will help level the playing field for businesses like mine and larger employers, allowing my businesses to join together with other retailers. Having the opportunity to purchase the same insurance as other large businesses seems only fair.”
The bill returns to the Senate.