House Workforce Committee Issues Report on Small Business Health Fairness Act (Part 2 of 2)
Continues from Part 1 of 2
MINORITY VIEWS
Introduction
Committee
Before the Affordable Care Act Workers Had Few Options
Before the ACA, employer-provided coverage was shrinking and costs were increasing dramatically. From 1999 to 2010, the cost of premiums for employer-provided health insurance increased by 138%.1 Additionally, workers often had limited options for affordable health insurance. Those who were employed were often locked in to their employment for fear of losing their health insurance, even if they wanted to retire, work part-time, or start a new business, due to inadequate coverage options outside the employer-sponsored system. Workers with pre-existing conditions were particularly disadvantaged, since they could be charged higher rates or denied coverage altogether in the individual market. Even those with comprehensive and affordable job-based health insurance saw higher premiums due to the high number of uninsured. Estimates show that every American family with insurance had to pay a hidden tax of roughly
1Kaiser
2Families
Businesses were also struggling before the ACA. Historically, small businesses were charged more for the same benefits compared to large employers. Small businesses employing women or workers with chronic or high-cost illnesses were charged higher insurance rates in many states. Therefore, a single sick or older employee could make health insurance unaffordable. Because small employers have fewer employees to spread risk across than larger employers, premiums varied dramatically from year to year due to changes in workers' health status.
Progress of the ACA Helps Small Businesses & Working Families
The ACA took steps to level the playing field. The ACA added reforms to ensure that one small business with an older or sick employee or owner is not disadvantaged compared to other small businesses. The medical loss ratio provision of the ACA requires insurance, including plans that cover small businesses, to spend at least 80% of premiums on health care claims and quality improvement, ensuring that premium dollars go toward the actual health costs of covering the small business and its employees, and not just profits. Further, the ACA created more options for employers and workers through the creation of the Small Business Health Options Program (SHOP) and included a tax credit to defray the cost of health insurance for their employees.
The ACA also establishes several safeguards for workers and families. Thanks to the ACA, most insurance plans must now provide coverage without cost sharing for certain preventive health services, including pap smears and mammograms for women, well-child visits, flu shots, and more. Early estimates after the ACA's passage showed that there were around 129 million Americans with a pre-existing condition, 82 million of whom were enrolled in employer-based coverage.3 For these millions of American workers, the ACA means that losing a job does not mean losing health insurance coverage. "Job lock" has been reduced, allowing workers to structure their careers in ways that make sense for them. This is particularly important for young workers, who are very often in school or making the early career choices that have a long-term impact on their careers. This is also important for entrepreneurs who want to start their own business.
3Department
The Republican Replacement Plan Threatens the Health Insurance Security of American Families
Two days prior to the Committee's consideration of the three bills,
The American Health Care Act is an inadequate and unacceptable replacement plan. The legislation eliminates the ACA premium tax credits that millions of Americans depend on to pay for health coverage, in favor of a completely inadequate flat tax credit that leaves working families totally exposed to premium increases. The tax credits provided by the Affordable Care Act are based on income and are also tied to the cost of insurance premiums. In general, the lower an individual's income, the larger the tax credit and the more expensive the premium, the larger the credit. Therefore, the tax credit adapts to address the situation of the individual. However, under the Republican's plan, the credits range from
In addition, the bill dismantles
Older Americans will be forced to pay premiums five times higher than what others pay for health coverage, undoing the current limitation that stipulates that older individuals can only be charged three times more than young enrollees are charged. The Republican bill also shortens the life of the
4Center on Budget and Policy Priorities, House Republican Health Plan Would Weaken Medicare, (
The
5Congressional Budget Office, Cost Estimate of the American Health Care Act, (
6Id.
For these abovementioned reasons, hospitals, providers, consumer groups and advocacy groups are opposing
7AARP, Letter to Chairmen and Ranking Members of the Energy and Commerce and Ways and Means Committees, (
8AFL-CIO, Press release:
9Consortium
10American
H.R. 1101 Will Create Market Fragmentation and Threaten Benefits
Part of the Republican's repeal and replace effort is centered around expanding association health plans (AHPs). Association health plans are groups of small employer groups or individuals that band together to obtain health insurance. Proponents argue that AHPs would expand access and drive down costs, resulting in more health coverage options. However, there are likely to be winners and losers under this approach and many workers and employers will be left out in the cold.
Association health plans are not a new idea. In fact, they have been studied at length, including in a 2000 CBO report that found that they would have almost no impact in increasing health coverage.11 Instead, they are likely to exacerbate adverse selection and shift costs on to workers. Although AHPs would be offered in competition with other small group and individual market plans, they would operate under different rules. This would fragment the market as lower-cost groups and individuals would move to establish an AHP, and higher-cost groups and individuals would remain stuck in traditional insurance plans. Such adverse selection would result in higher premiums in non-AHP plans. Ultimately, higher-cost (sicker or older) groups could find it more difficult to obtain coverage.12
11Congressional Budget Office, Increasing Small-Firm Health Insurance Coverage Through Association Health Plans and HealthMarts, (
12The
With the passage of the ACA, health insurance sold through an association to individuals and small employers generally must meet the same insurance standards of coverage sold in the individual and small group market. The Small Business Fairness Act, introduced by
13Id.
Committee
14American
H.R. 1101 Gambles With the
There are grave concerns around the solvency of association health plans. The history of multiple employer welfare arrangements (MEWAs) offers insight into the financial challenges that AHPs could face. In 2001,
15The
16Id.
17United
H.R. 1101 allows AHPs to form under limited regulation and oversight, hearkening back to the time when MEWAs also enjoyed limited regulation and gambled with the financial security of both workers and employers. AHPs threaten both employers and workers and have been soundly dismissed as doing little to actually improve coverage or decrease costs in a sustainable way.
Committee Consideration of H.R. 1101
During Committee consideration,
Several Committee Democrats offered amendments to ensure that association health plans did not unduly disadvantage certain pockets of small businesses and workers. Ranking Member Scott offered an amendment prohibiting the legislation from taking place if CBO determined small group market premiums would rise as a result of the legislation. In his remarks, Ranking Member Scott underscored the potential impact of AHPs on small group market premiums saying, "The reason people want to join an association is because they will be in a pool with younger, healthier people whose healthcare costs are less than average. Of course, no one would form an association for this purpose with people who have above average costs because it would be cheaper for them to just stay in the insurance pool and pay the average rate. So these association plans with healthier people will always work for those lucky enough to get in. But if you have all these healthy, cheaper people in an association, then that leaves those left behind with higher costs in the small group market and then the premiums for the small group market go up. It is simple arithmetic."
18The
19National
Committee
H.R. 1101 was favorably reported, as amended, on a party line vote (22-17) with all Democratic Members opposing.
Conclusion
After seven years of disparaging the ACA,
Robert C. "Bobby" Scott,
Ranking Member.
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