SMALL BUSINESS HEALTH PLANS

ISSUE: A significant number of America's 45 million uninsured citizens go to work every day. They work for small employers that cannot afford to offer quality health insurance benefits. Small businesses are generally unable to achieve the efficiencies of large group rates that would be comparable to a union or large employer plan. A broad coalition of small business organizations, including NAR, have advanced proposals to create a new market tool for small businesses. Under their plan, associations could provide health insurance coverage to their members through small business health plans (SBHPs), also known as association health plans (AHPs). SBHPs would be regulated under the same federally-prescribed rules (ERISA) and the same state regulations that govern large corporate and union health plans. Like existing ERISA-regulated corporate and union plans, SBHPs would also be exempt from complying with state mandated coverage requirements. This permitted exemption from state regulations would allow SBHPs to offer members a single, uniform plan regardless of where subscribers reside. By allowing small businesses to band together, SBHPs will increase small businesses' bargaining power with health insurance providers and lower overhead costs by as much as 30 percent.

NAR POSITION: NAR supports efforts to allow bona fide associations to offer federally regulated health insurance coverage plans that are exempt from costly state-mandated coverage provisions.

OPPOSING VIEWS: Insurers that currently dominate the small business and individual insurance markets oppose the legislation. Governors and state insurance commissioners oppose the proposed legislation which they believe would limit their ability to regulate SBHPs. Other observers charge that SBHPs will create a 'second-class' type of health insurance, "cherry pick" the best risks from the pool of individuals currently insured by individual policies and leave the individual market with only the worst risks.

IMPACT ON REALTORS®: State REALTOR® associations confirm that health insurance has increasingly become an issue for their members. In 1996, 40% of REALTORS® obtained their health insurance through a spouse. By 2004, that had declined to about a quarter of REALTORS®. More seriously, where 13% of REALTORS® were uninsured in 1996, by 2004, 28% had no health insurance. SBHPs could provide a useful tool for both real estate associations and real estate companies as both a value-added benefit of membership and company recruitment.

STATUS/OUTLOOK: H.R. 525 and S. 406, the Small Business Health Fairness Act, are currently pending. Similar bills have passed the House in several sessions of Congress over the past decade, but have never cleared the hurdle in the Senate. H.R. 525 and S. 406 would authorize the creation of small business health plans (SBHPs), also known as association health plans (AHPs). The legislation would allow small businesses and the self-employed to band together to purchase quality health care at a lower cost.

In the House, senior legislators from both parties sponsored the bill: Education and Workforce Subcommittee Chairman Sam Johnson (R-TX), Education & the Workforce Committee Chairman John Boehner (R-OH), Rep. Nydia Velazquez (D-NY), and Rep. Albert Wynn (D-MD). Ten Senators (but only one Democrat) joined small business advocates Olympia Snowe (R-ME and Chair of the Senate Small Business Committee), Jim Talent (R-MO), and Kit Bond (R-MO) in introducing H.R. 525.

The House Education and the Workforce Committee has considered and approved H.R. 525. It will likely come to the House floor before Memorial Day. NAR President Al Mansell testified at April 20 Senate Small Business Committee hearings on the bill. NAR CEO Terry McDermott has been meeting with various health insurance providers and associations to advocate NAR's perspective on this issue and to explore the feasibility of finding common ground so the legislation can work through the Senate and move to the President.

NAR continues to work with the National Federation of Independent Businesses-led SBHP coalition on efforts to advance the legislation in the 109th session of Congress. More information on SBHPs and NAR's position can be found at http://www.realtor.org/sbhps.

CONTACT: Marcia Salkin 202-383-1092

This page was last reviewed May 13, 2005