Senator Snowe Introduces Small Business Health Fairness Act of 2003

S. 545. A bill to amend title I of the Employee Retirement Income Security Act of 1974 to improve access and choice for entrepreneurs with small businesses with respect to medical care for their employees; to the Committee on Health, Education, Labor, and Pensions.

Ms. SNOWE. Mr. President, today I am introducing a bill that will provide revolutionary changes to the health insurance choices available for small businesses. This bill, "The Small Business Health Fairness Act of 2003" will give small businesses the same market-based advantages and leverage that large employers and unions currently enjoy to provide health insurance for their employees.

One month ago, I convened my first hearing as Chair of the Committee on Small Business and Entrepreneurship to explore the crisis small businesses are currently facing in their attempts to find affordable health care for their employees. The reason I made this my first hearing was that whenever I spoke to small businesses this is the number one issue they wanted to discuss. Small businesses in my State are literally desperate for more health insurance options; some business owners even say this is keeping them awake at night.

At the hearing small businesses from my home State of Maine made it clear that they have only one choice for their health care. Even when they band together in local purchasing pools, they are unable to attract any other insurance carriers to provide them with less expensive and more flexible options. Even though they have cut back on the coverage and increased the costs to the employees, they are still finding it almost impossible to provide health insurance to their employees. And as the costs to the employees increases, many employees find this too much to absorb, which leaves them uncovered and, therefore, increase the ranks of the employed but uninsured.

Indeed, the Washington Post reported on February 28 that worries about rising health care costs registered higher in a poll conducted by the Kaiser Family Foundation than even concerns over the stock market or terrorist attacks. Thirty-eight percent of the respondents were "very worried" that the cost of their health care or health insurance would increase compared to 22 percent who were "very worried" about losing their savings in the stock market, or 19 percent who were "very worried" about being a victim of a terrorist attack.

With small businesses creating up to 75 percent of net new jobs in America and with a shocking 56 percent of the 41.2 million uninsured in this country already either working a full-time, full-year job or depending on one who does, we have an obligation to ensure that more of these individuals can receive insurance through their employers. So when the Kaiser 2002 Employer Health Benefits Survey reports that only 61 percent of all small businesses are offering health benefits—and that's down from 67 percent just three years ago—is there any question that we're headed in exactly the wrong direction?

This is a crisis, and it's even worse in businesses with fewer than 50 employees. Of those, only 47 percent currently provide health insurance benefits, and the Department of Labor reports that only 24 percent of small businesses that employ "low-wage" workers offer health plans.

The fact is, with more than two-thirds of all Americans relying on their employer for health insurance, we can't afford to continue the disturbing trend identified by the Kaiser Family Foundation, where monthly premiums for employer-sponsored health insurance on average rose 11 percent from 2000 to 2001, and then 12.7 percent from 2001 to 2002—the second straight year of double digit increases. As a result, 22 percent of all firms increased employee deductibles in 2002, and 32 percent told Kaiser they are likely to do so this year.

The problem is all the more acute for small businesses. For those with fewer than 10 workers, the employer and employees together pay—on average—about 8 percent more in premiums than the amount paid by larger companies. And for all firms under 200 employees, 84 percent indicated to Kaiser that cost was an important factor in not offering health care.

The result of all this isn't hard to predict. Businesses can and clearly are dropping health benefits. Others struggle onward in providing coverage, but only at the cost of the growth of the business, or offering packages with higher premiums, or a combination of both.

If we can do something that will help more small businesses provide health insurance to their employees, then we can significantly reduce the number of those who are without health insurance in this country.

The Small Business Health Fairness Act of 2003 will improve access to affordable health care for small businesses by giving them the same advantages currently enjoyed by large employers and unions. The bill employs a very basic principle—that volume purchasing of insurance by small businesses will work as it does for any other commodity and for any large business or union that purchases health insurance coverage—it will help reduce the cost. As President Bush has said, "It makes no sense in America to isolate small businesses as little health care islands unto themselves. We must have association health plans."

The Act will allow small businesses to pool together nationally, under the auspices of their bona fide associations, and either purchase their insurance from a provider, or self-insure in the same way that large employers and unions currently do. These association health plans, AHPS, would be monitored and regulated by the Department of Labor's Employee Benefits Security Administration in the same way that more than 275,000 plans offered by large employers and unions are currently regulated.

This agency is currently overseeing plans that cover 72 million people. The Department of Labor released a report last week that reveals high rates of compliance by group health plans with health care laws enacted under the Employee Retirement Income Security Act, ERISA. More importantly, the report and the compliance project that is the subject of the report, are further evidence of the Labor Department's commitment and proven success in effectively monitoring health plans. The report establishes that the Department is prepared to oversee association health plans.

Studies by the Small Business Administration, the General Accounting Office, and the Congressional Budget Office have all found that these types of plans operate with between 13 and 30 percent lower administrative costs. These lower costs can then be translated into reducing costs to subscribers or providing more benefits.

Another reason AHPs will be able to offer less expensive plans, and also greater flexibility, is because they will be exempt from the myriad State benefit regulations. Associations will be able to design their plans to meet the needs of their members and their employees. By administering one national plan, it will further reduce the administrative costs instead of trying to administer a plan subject to the mandates of each State.

Even though the benefit mandates will not be in effect, associations will need to design their plans so that enough members participate in them to attract the necessary employees to make them work. This means that they will naturally provide a full range of benefits similar to what many States currently require. In many cases, the plans offered by large employers and unions, which are also exempt from the State benefit mandates, are the most generous plans available. People will often stay in those jobs specifically to keep their health care coverage.

The Act would also provide extensive new protections to ensure that the health care coverage was there when employees need it. Associations sponsoring these plans would need to be established for at least three years for purposes other than providing health insurance—this is intended to prevent the current epidemic of fraud and abuse that is occurring through sham associations who take money from unsuspecting small businesses and then cease to exist when some files a claim.

In addition, association health plans would be required to have sufficient funds in reserve, specific stop-loss insurances, indemnification insurance, and other funding and certification requirements to make sure the insurance coverage would be available when needed. None of these requirements apply to any of the plans currently regulated by the Department of Labor, either the large employer plans under the Employee Retirement Income Security Act, ERISA, or the union plans under the Taft-Hartley Act.

The approach of this bill is, I believe, a good one—but I also consider it a starting point. And in that light, I intend to work with all groups and interested parties that are committed to passing this bill so that we can improve this bill and finally provide small businesses with more health insurance options at lower costs. The current situation is simply unacceptable. Those who oppose this bill and believe the status quo only needs to be modified slightly are not paying attention—they are not listening to the millions of small businesses who are desperate for more choices, or the small employers who are unable to get health insurance at any cost.

The time for stalling on providing relief for small businesses unable to get affordable health insurance is over. We must act now, and we must pass the Small Business Health Fairness Act of 2003 to bring small businesses more choices and use the power of competition to bring them better options.

I ask unanimous consent that the text of The Small Business Health Fairness Act of 2003 and an explanation of its provisions be printed in the RECORD.