posted on:  5/18/2006     revised: 3/9/2010

This week (in May 2006) the U.S. Senate defeated the Association Health Plan bill that was being pushed by the Bush Administration as was widely predicted. The idea was to allow small businesses (including self-employed individuals) to buy health insurance as part of a much larger group. President Bush had earlier referred to this as part of a three-pronged approach to solving the health care crisis. The most controversial measure of the association health bill, it turned out, was the removal of state control of health insurance issued within its borders. The fundamental issue was that there was no indication that this measure would achieve any of its stated goals. Senators voted along party lines to defeat the measure.

Virtually everyone, including the bill's sponsors, now agree that the measure will not cut costs.  Yet comments from one of the bill's sponsors, a senator from Wyoming, had me wondering how a person can become a U.S. Senator and still be so stupid.  Could it possibly be so?  Republican Senator Michael B. Enzi said savings would have come from reductions in administrative costs and not from benefit cuts.  This is idiotic.  Administrative costs are a small percentage of heath care dollars spent, especially in today's consumer driven group health plans.  Even if administrative costs could be cut (even though there s no indication this is likely) the savings would add up to only a tiny percentage of the overall health insurance premium. Certainly the savings would not be enough to offset the cost increase created by the "least common denominator" eligibility factors that plague group health insurance plans today.

The bill was opposed by the U.S. Chamber of Commerce, the AARP and most other consumer groups who weighed in on the issue. I had previously written an negative opinion of the bill on behalf of MedSave.com, a commercial promoter of low cost health insurance. Although MedSave.com would have benefited financially from the passage of the bill, consumers would not. Many people are unaware that most of the low cost health insurance plans currently available in the U.S. to individuals and self-employed workers are already offered though associations organized under state law.

The only notable support for the federal bill, to my knowledge, was the National Association of Realtors. It appears that their members would have benefited, primarily because Real Estate firms do not offer group health plans, Realtors tend to be considered self-employed, and are older, as a group, than many other populations of workers.

The association health plan issue will resurface later this year.  Eventually we must deal with the core question of why health insurance that s considered to be a good choice for a person in one state is considered illegal in another. Once we solve this more basic issue, the rest will be easy. There is no reason why creating another level of bureaucracy through "association health plans" will solve any of the real issues.

keywords:   health care reform association health plan

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Copyright 2010 by Tony Novak. Originally produced and published for the "AskTony" column syndication prior to 2007. Edited and independently republished by the author in March 2010. All rights reserved.