In his State of the Union last night, Mr. Bush once again mentioned Small Business Association Health Plans (AHP) as the panacea for small business health care woes.

An AHP is insurance coverage offered to members of an association. The association must exist for some other purpose than to sell insurance, for example, a trade assocation or a chamber of commerce.

It seems to me that AHP legislation only allows trade associations and chambers of commerce to become health insurance brokers without going through any licensing or regulatory process. That’s why the Small Biz lobbying group (and a lot of chambers of commerce) are pushing for AHP’s – I imagine they’ll probably get commissions for each policy they sell.

Before understanding whether an AHP is good for your small and micro business, it’s necessary to understand the difference between providing access to more insurance policies at a lower premium (AHP) and access to quality health care at lower cost. The AHP does the former, and may have nothing to do the latter.

 

With lower premiums, though, comes another problem: the insurance company has less money available to compensate their insured on their claims. As a result, here is what the insurance company will likely do:

• Not cover many medical services and procedures.
• Deny coverage to high risk individuals (in my experience, this means all individuals with any health problem)
• Deny claims more often and more arbitrarily
• Negotiate lower rates, discouraging participation by many doctors and medical providers.
• Worst case scenario, the insurance company may have to file bankruptcy and leave you holding the bag with the medical debt.

So, in exchange for a lower insurance premium (a portion of which is probably kicked back to the association that offered the plan), you get fewer medical care options, more expensive out-of-pocket medical costs, no predictability in continued coverage at the lower premium, and no guarantee of quality and cost-effective medical care.

There are many other problems with AHPs, including the concern of insurance fraud, but that’s too detailed for this post. The bottom line – if AHPs become law, be very careful to do a lot of research about any insurance carrier with whom you intend to contract.

Your small business attorney should be able to discuss the wide variety of health-care options available to your small or micro business and its employees.