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Issue Brief || Related Documents & Links || Contact Information

Association Health Plan Issue Brief

Summary/Issue
One of the top concerns of AeA member companies is the cost of providing health insurance to their employees. AeA is addressing this issue by supporting legislation that lowers the cost of health insurance and expands health insurance availability to small and mid-sized AeA companies.

Health insurance provided by companies is regulated in one of two ways. For large corporations and unions, their health insurance benefits are governed by the Employee Retirement Security and Income Act (ERISA). Enacted in 1974, ERISA governs all private-sector, employer-provided benefits, including pension, health, and welfare benefits. The key component of ERISA is its preemption of state and local laws regulating employee benefits. Supreme Court decisions since 1974 have reaffirmed the supremacy of ERISA over employee benefits. The broad ERISA preemption prevents state and local governments from mandating or micromanaging employee benefits.

Under ERISA, large corporations and labor unions have been able to provide health insurance under a uniform set of rules. This "economy of scale" allows corporations and unions to provide health insurance at a lower cost and provide more benefits for their employees/members. By providing uniform rules and regulations governing employee health insurance, ERISA helps lower administrative costs.

Health insurance not governed or regulated by ERISA is regulated by the states. Most health insurance purchased by small companies is regulated by the states. Many states place requirements on insurance coverage and have enacted regulations that make health insurance more expensive for smaller companies than larger companies.

Legislation has been introduced in Congress to extend ERISA rules and regulations to smaller companies that purchase health insurance through association health plans (AHPs), which is health insurance sold through legitimate trade associations. If enacted, AHP legislation could both lower the cost of health insurance purchased by smaller companies and increase the number of benefits these companies can offer their employees.

What this bill means to my company
Enactment of AHP legislation would give smaller AeA member companies more health insurance options, resulting in lower health insurance prices and more benefits for employees.

Status/Outlook
AHP Legislation continues to pass the House, but is stalled in the Senate. Because of Senate rules, it effectively takes 60 votes to pass any legislation. Furthermore, Senate rules allow for unlimited amendments on legislation. Without limiting the hours of debate, Senate consideration of AHP legislation would allow for other amendments dealing with the issue of health care to be considered. Under that scenario, issues such as Medicare reform, genetic discrimination, and other health care issues could be included in the debate on AHP’s. Therefore, it is possible that AHP legislation could be enrolled into a larger health insurance reform bill in the Senate, in an attempt to pass a bill. President Bush supports AHP legislation and the Secretary of Labor Elaine Chao has taken the lead for the Administration in support of AHP legislation.

AeA Position
In February 2003, the AeA Board of Directors adopted the following resolution:

Whereas,

Health insurance premiums are rising at an average of 15% per year per participant within employer-sponsored plans
Annual premium increases of 40% and even 50% and/or benefit reductions are typical of what small businesses and their employees are experiencing today.
On average, workers in firms with less than 10 employees pay 17% more for a given health benefit than workers employed in a large company.
These price increases have a negative effect on the quality of health insurance AeA members can provide their employees.

Therefore, now it is resolved: AeA will support Association Health Plan legislation that –

Expands ERISA to cover health insurance offered by legitimate trade associations; and,
Provides safeguards to ensure that those associations that offer health insurance regulated by ERISA contains protections to ensure the solvency of such plans.

AeA will be taking steps to assist in the passage of AHP legislation.