GAO Report Finds Lack Of Competition Among Insurers Offering Health Plans To Small Businesses

Main Category: Health Insurance / Medical Insurance
Article Date: 03 May 2006 - 23:00 PDT

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A small number of health insurers account for a large share of the policies sold to small businesses in most states, a trend that has left consumers with fewer selections and higher costs, according to a recently released Government Accountability Office report, the New York Times reports. According to the report, the largest health insurer in the average state held 43% of the market for small group coverage, compared with 33% in 2002. In nine states, the largest health insurer held more than half of the market for small group coverage. Paul Ginsburg, president of the Center for Studying Health System Change, said, "There is a strong trend toward more concentration in health insurance in local markets. Being large seems to be more important than ever. Small plans are losing market share to large plans." Sen. Olympia Snowe (R-Maine) added that "small businesses have extremely limited choices when seeking health insurance for employees." Karen Ignagni, president of America's Health Insurance Plans, said, "There certainly have been some large insurance company mergers in the last few years," but the "data do not show a link between concentration of insurance markets and rising health care costs."

Senate Bill
The Senate within two weeks plans to vote on a bill (S 1955) that would allow small businesses to form association health plans under certain conditions to help make coverage more affordable (Pear, New York Times, 4/30). The legislation, sponsored by Sen. Mike Enzi (R-Wyo.), would allow small businesses and trade associations to partner to offer group health plans on a statewide or nationwide basis. The bill would allow supervision of the plans to remain with state officials, rather than with the Department of Labor. In addition, although the legislation would allow small businesses and trade associations to pool members independently, they would have to establish fully funded plans, rather than self-insured plans. Under the bill, health insurers could market plans to businesses and individuals that do not meet current state benefits requirements (Kaiser Daily Health Policy Report, 4/28). According to the Times, the legislation has "touched off a battle between small businesses, which contend that state requirements drive up costs, and consumer groups, which see them as indispensable protection for patients." The National Association of Realtors and the National Federation of Independent Business have led a campaign in support of the bill. Todd Stottlemyer, president of NFIB, said that health insurance is "the No. 1 concern of small business owners." However, AARP, the American Cancer Society and the American Diabetes Association have led a campaign against the bill, which they maintain would eliminate state requirements that health insurers "cover such vital benefits as cancer screening, mental health services, diabetes supplies and education, and well-child care," according to their advertisements. Daniel Smith, a vice president of ACS, said, "We are all for increasing access to insurance but not if it means degrading the quality of coverage for people who already have it. The Senate bill is beyond repair." AARP CEO William Novelli said, "The bill would make it much harder for older workers to get health insurance or even to get a job" (New York Times, 4/30).

Broadcast Coverage
NPR's "Morning Edition" on Monday reported on the bill. The segment includes comments from Enzi; Mila Kaufman, assistant research professor at Georgetown University's Institute for Health Care Research and Policy; and Jim Schlick, chief government affairs and advocacy officer for ADA (Rovner, "Morning Edition," NPR, 5/1).

The complete segment is available online in RealPlayer.

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