House Passes Association Health Plans for Small Businesses

Bill would allow multiemployer health plans across state lines; Senate hurdle awaits

By Stephen Miller, CEBS Mar 24, 2017
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While the House GOP leadership prepares for a vote today on its bill to repeal and replace the Affordable Care Act, another health care measure—with far more limited aims—was brought to the floor and approved.

The House of Representatives passed the Small Business Health Fairness Act (H.R. 1101) on March 22, a bill that would make it easier for small businesses—those that could purchase coverage in the small group market—to band together and offer employee coverage through association health plans (AHPs).

The bill passed on a mostly party-line vote of 236 to 175, with no Republicans voting against it and only four Democrats voting in favor. That political divide suggests the bill could face a tough time in the Senate, where 60 votes are needed to override a filibuster by Democrats and only 52 senators are Republicans.

[SHRM members-only toolkit: Managing Health Care Costs]

Options for Small Employers

"Association health plans will provide small employers with an added option to offer competitive and affordable health benefits to their employees, similar to large employers," said Chatrane Birbal, a senior advisor for government relations at the Society for Human Resource Management. "In addition, the bill recognizes and preserves the Employee Retirement Income Security Act by allowing small employers to join together with other employer groups in other states to maintain common benefits across state lines."

The White House released a statement in support of the measure, saying, "H.R. 1101 would enable small businesses to provide health benefits to their workers through trade and professional associations, potentially benefiting millions of American families. …. Small businesses also would benefit from larger risk pools, increased negotiating power and administrative efficiencies, decreasing costs for their workers."

"When it comes to accessing high-quality health care coverage, small businesses should not be treated any differently than large corporations and unions," said Rep. Tim Walberg, R-Mich., who co-sponsored the legislation. "This bill will level the playing field for small businesses, and it is one step toward achieving a competitive health care marketplace that stretches across state lines."

AHPs could function in one of two ways, Walberg and his fellow co-sponsor, Rep. Sam Johnson, R-Texas, explained:

  • They could work directly with an insurer to negotiate better rates, or
  • They could self-fund, just as many large corporations and unions already do.

Self-funded AHPs would also be exempt from many costly state and federal requirements, as many corporate and union plans are.

"Steps must be taken to better support these smaller businesses in providing coverage. Association health plans are an important answer," said Jon Hurst, president of the Retailers Association of Massachusetts. "Employees of small businesses deserve the same marketplace rights to obtain comparable coverage at comparable rates as those that work for big business and big government."

State Regulation at Issue

The partisan divide over this bill foreshadows a coming fight between Republicans and Democrats over allowing health plans, in general, to be purchased across state lines.

The Small Business Health Fairness Act "would exempt association health plans marketed to small businesses from adhering to critical state and federal requirements for small group coverage," said Lydia Mitts, associate director of affordability initiatives at Families USA, which advocates for progressive health care policies.

"While some members of AHPs may benefit, this proposal would undermine states' ability to regulate health coverage sold to their residents and to implement local standards and protections," said a statement by the Commonwealth Fund, a nonprofit foundation that supports expanding health care coverage to low-income and uninsured Americans.

"States are well-positioned, often with broad enforcement authority, to protect their residents by preventing or quickly identifying and closing down the operators of scam health insurance," the group contended. "H.R. 1101 would severely undermine states' ability to conduct this kind of enforcement."

Reps. Johnson and Walberg argued, however, that "our bill includes requirements that would provide accountability, stability and consistency across the country."

A bipartisan note was sounded by Billy Wynne, managing partner of TRP Health Policy in Washington, D.C., and former health policy counsel to the Senate Finance Committee under then-Chairman Max Baucus, D-Mont. 

"More can be done to help small businesses, where coverage rates still run behind other sectors," Wynne wrote recently on the Health Affairs Blog. "Beefing up their tax subsidies would help, but so might allowing them to pool together in creative ways."

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