Mercer Risk, Finance & Insurance
Prepared for: National Small Business United
June 2003
Impact of Association Health Plan Legislation on Premiums and Coverage for
Small Employers
By Beth Fritchen FSA, MAAA & Karen Bender FCA, ASA, MAAA
National Small Business United (NSBU) engaged Mercer Risk, Finance &
Insurance (Mercer) to analyze the “Small Business Health Fairness Act of
2003” (H.R. 660 and S. 545). This legislation would encourage the formation
of federally certified Association Health Plans (AHPs) by exempting these
plans from various state laws that govern health insurance sold to small
employers today.
Proponents of H.R. 660 and S. 545 argue that federally certified AHPs would
expand access to affordable health insurance for small employers and reduce
the number of uninsured. Opponents believe the legislation would have the
exact opposite effect – that is, it would cause premiums to rise and the
number of uninsured to increase.
In brief, we found that once federal AHP legislation was fully implemented:
* Health insurance costs would increase significantly for small businesses
in the state-regulated insurance market.
* AHP legislation would increase, not decrease, the number of uninsured.
* Federal AHPs would gain a pricing advantage through risk-selection, not
greater administrative efficiency.
* Federal AHPs would insure the healthiest small employers.
* Small employers would face higher premiums overall.
These results indicate that AHP legislation is not a solution to rising
health care costs for small employers. While some firms obtaining coverage
through AHPs may see lower premiums, firms with higher-cost employees would
see their premiums increase. Overall, small employers would pay higher
premiums and the uninsured population would increase if this legislation
were enacted.
http://www.nsbu.org/files/mercer_ahp_report.pdf