Compliance April 22, 2005

Michigan Insurance Regulator, Governor Oppose Federal AHP Bill

April 22, 2005 (PLANSPONSOR.com) - The top insurance regulator in the state of Michigan - as well as its Governor - are urging congressional delegates from the state to oppose a federal bill that would allow the creation of association health plans (AHPs) that are exempt from state regulation.
Reported by

Linda Watters, commissioner of the Office of Financial and Insurance   Services , warned that the legislation – H.R. 525, also known as the Small   Business Health Fairness Act – would do more harm to the system than good, according to A.M Best.

She also said that the proposed legislation would allow AHPs to be an   unregulated version of multiple-employer welfare arrangements. In the 1980s, she claims, these arrangements left over 400,000 consumers with $123 million in unpaid   claims from large-scale fraud, insolvency and bankruptcies.

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Governor Jennifer Granholm also came out in opposition to the bill. In a statement, she asserted that  state’s goal was to “make health care more affordable and accessible for   Michigan families, not remove the protections that ensure thataffordability and accessibility.”

Her reasons were numerous. “Those who share my concerns with association health plans center their   discussion around two main points,” she said in the statement. “First, AHPs would further   fragment and destabilize the small group market, resulting in higherpremiums for many small businesses. Second, AHPs would be exempt fromstate solvency requirements, patient protections and regulatoryoversight, which would place consumers at risk.”

There are other state regulations that AHPs would be exempt from, A.M. Best reports. They include:

  • The Michigan Patient Bill of Rights.
  • The Patient’s Right to Independent Review Act.
  • Timely claims processing and payment procedure legislation enacted in   2002.

The bill is backed by the Bush administration and by GOP majorities in both the House and Senate. Most large health insurance organizations are against the bill,   including America’s Health Insurance Plans, the Blue Cross Blue Shield   Association and the National Association of Health Underwriters (See  Congressional Group Reintroduces Association Health Plan Bill ).

According to figures gathered by the Senate sponsor of the bill, Senator Olympia   Snowe (R-Maine), AHPs have been found to operate with administrative costs that are 13% to 30% lower than those of more traditional health plans.

The bill has already been cleared by the US House Committee on Education and the Workforce by a vote of 25-22.

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