Copyright 1999 Federal News Service, Inc.
Federal News Service
JUNE 10, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
1608 words
HEADLINE: PREPARED STATEMENT OF
JOSEPH
E. ROSSMAN
VICE PRESIDENT OF FRINGE BENEFITS
ASSOCIATED BUILDERS AND
CONTRACTORS
SPEAKING FOR THE MERIT SHOP
BEFORE THE
HOUSE SMALL BUSINESS COMMITTEE
SUBJECT - ASSOCIATION HEALTH
PLANS:
GIVING SMALL BUSINESSES THE BENEFITS THEY NEED
BODY:
Associated Builders and Contractors (ABC)
appreciates the opportunity to participate in the Small Business Committee
hearing on "Association Health Plans: Giving Small Businesses
the Benefits They Need." We thank Chairman Talent and members of the Committee
for undertaking a sensible look at improving the nation's
health care needs, and we appreciate the opportunity to examine
legislation that will help increase access to health insurance
for small businesses.
ABC is a national trade association representing over
21,000 contractors, subcontractors, material suppliers, and related firms from
across the country and from all specialties in the construction industry with a
network of 83 state chapters. Our diverse membership is bound by a shared
commitment to the merit shop philosophy of awarding construction contracts to
the lowest responsible bidder, regardless of labor affiliation, through open and
competitive bidding. With 80 percent of construction today performed by open
shop contractors, ABC is proud to be their voice.
The construction industry,
which represents 12 percent of the Gross National Product and 9 percent of the
Gross Domestic Product, is an industry of small businesses as 94% of all
construction companies are privately held and 1.3 million construction companies
are not incorporated. As the nation's second largest employer, with 6 million
workers, the construction industry is the only goods producing industry in the
U.S. that will be creating new jobs through 2005 (Bureau of Labor Statistics,
1995). For every $1 million spent in construction, $3 million in economic
activity is generated and 13 new permanent jobs are created.
To remain at
the present level of activity, the construction industry needs an additional
quarter of a million (250,000) workers per year to replace an aging and retiring
workforce. One of the key elements to attracting and retaining workers and
remaining competitive in any industry is to provide high quality, flexible
health benefit plans. Maintaining cost effective
health insurance plans is a key ingredient in achieving this
objective.
The Associated Builders and Contractors Association
Health Plan
Providing quality health care
benefits is a top priority for ABC and its members. ABC has operated an
association health plan for 42 years through the ABC Insurance
Trust, which is just one of ABC's many membership services. ABC is a perfect
example of a trade or professional purchasing pool, and as a purchasing pool for
employers, it can has a significant impact upon the small employer
health insurance market in both price and design.The ABC
Insurance Trust was founded in 1957 by five contractors who could not buy group
health insurance for their employees in the open market because
of their size. Since that point in time, the ABC Insurance Trust has served as a
voluntary purchasing pool for members of the association. An important component
of the plan's long-term success is that it is guided by contractor members who
serve as trustees. As participants in the program, they act in the best interest
of their fellow members and their employees. Participation of the board of
trustees is a key ingredient in aggregating the voice of employers to negotiate
price and coverage with insurance carriers and other providers.
ABC's
insurance program offers HMOs, PPOs, and traditional health
insurance plans which have both in-network and out-of-network benefits. All of
ABC's plans provide wellness benefits with coverage for physicals and annual
check ups. This includes 100% coverage for annual pap smears and mammograms for
women covered under ABC's plan. ABC also offers dental coverage, group life
insurance, and disability programs to serve members of the association. Today
the program covers 31,000 employees and their families nationwide. A majority of
those covered works for small construction firms with 10-20 employees. Each ABC
plan is fully insured with claim payment processing through an insurance
company. The insurance company also provides medical case management for large
or complicated conditions. ABC staff in the Insurance Division at ABC's national
office in Arlington, Virginia handles plan administration and enrollment. The
Insurance Trust operates in full compliance with the Employee Retirement Income
Security Act (ERISA) of 1974 reporting requirements, with the Consolidated
Omnibus Reconciliation Act (COBRA) of 1985 and with the Health
Insurance Portability and Accountability Act (HIPPA) of 1996. Complying with the
federal HIPPA legislation requires ABC and other associations to provide open
access to all members and provide credit for prior coverage. In fact,
association health plans are specifically referenced and
defined in the HIPPA legislation and are required to take all members under
HIPPA guidelines.
Just like a large employer, AHPs can have economies of
scale in numerous areas. The ABC plan, which operates nationally, has total
expenses of 13 1/2 cents (13.5%) for every dollar of premium. These costs
include all marketing, administration, insurance company risk, claim payment
expenses and state premium taxes. Alternatively, small employers who purchase
coverage directly from an insurance company can experience total expenses of 30
cents (30%) for every dollar of premium or more. It stands to reason that small
businesses that purchase coverage through an association health
plan can expect to save 15 to 20 percent, or more.
Bonafide trade
associations like ABC have an established infrastructure that allows them to
communicate with members more effectively because of their preestablished
relationship. Another component in the AHP is that any profit margin generated
by the health plan in a given year does not go to the
stockholders of the insurance company, they-stay in the plan and inure to(he
benefit of participants by keeping costs lower in the future.
AHPs can also
be similar to large employers through unique plan designs. This is a very
valuable option for member companies of ABC in that it provides additional
benefits over and above what many insurance vendors provide today. ABC has
successfully tailored the products and services specifically for the needs of
ABC contractor members. For example, all medical plans offered through the ABC
Insurance Trust also provides vision coverage, which includes coverage for
safety glasses, an item unique to the construction industry.
The Problem
The health benefit programs offered by ABC are consistent
with Congress' goal of meeting consumer demands for expanded benefits by
providing high quality health benefit options. One of the
principle reason's for Congress's enactment of the Employee Retirement Income
Security Act of 1974, ERISA, was to foster the growth of employee benefit plans
by promoting uniform federal regulation of those plans.
However, despite the
great need for increased health coverage and our members
ability to deliver it, increasing federal and state regulations have not always
had the positive impact that they purport for small employers and actually
obstruct the development of innovative and effective health
benefit programs.
A number of state reforms, such as those enacted in
Maryland have actually forced ABC to increase rates and reduce benefits in order
to comply with the law. State health insurance reforms and
community rating in New York forced ABC's insurance carrier to completely
withdraw from the market for employers with less than 50 employees. When these
and other state reforms occur, small employers are left with fewer alternatives
for health insurance coverage for themselves and their
employees.Recent mergers of health insurance companies have
also reduced competition and alternatives for employers who seek access to
quality and affordable health insurance. Today, there is a
great need to bring more competition back into the system rather than
continually reducing it.
The Solution
ABC strongly supports extending
ERISA preemption of costly state mandated benefits, currently available for
larger, self-insured plans, to bona fide association health
plans and professional societies for small businesses. Without the benefit of
ERISA's nationally uniform standards, many of the most creative, innovative and
cost-effective employer-sponsored health benefit plans could
not continue to exist because of the overwhelming costs of complying with
overlapping, inconsistent and incompatible state laws.
Now more than ever,
Congress needs to pass legislation that would extend the time-tested ERISA
preemption to bona-fide trade associations. ABC strongly supports H.R. 1496, the
Access to Coverage for Entrepreneurs Act (ACE) which was introduced in the U.S.
House of Representatives by Representatives Jim Talent (R-MO) and Cal Dooley
(D-CA).
In conclusion, association health plans provide
affordable health coverage to small businesses, and extend
coverage to uninsured people. While AHPs are not the entire
answer to the problem of the uninsured, AHPs are an essential
component of the solution for the uninsured. AHPs are important
for many working families employed in small businesses who otherwise could not
afford coverage. At a time when certain coverage are rapidly being manipulated
into costly, state mandated benefits, employers may be increasingly mandated out
of coverage, or worse yet, out of business.
ABC appreciates this opportunity
to participate in such an important hearing and we and look forward to
continuing a constructive dialogue on how to increase access to affordable and
competitive health insurance for small businesses.
END
LOAD-DATE: June 12, 1999 
