NCPA - National Center for Policy Analysis

Help for Small Business: Association Health Plans

January 23, 2004

Cost is a reason why the majority of small businesses do not offer medical coverage to their employees, says USA Today. To address the problem, in his State of the Union address President Bush called for association health plans (AHPs).

Small businesses can't spread their risk throughout a large workforce and pay higher rates for their health insurance. AHPs now exist, but they operate under the regulations of 50 different states. The president's plan would allow them to form national pools to negotiate lower rates.

  • In 2003, the inability to find affordable insurance surpassed taxes as the single most troubling issue for small business owners in a survey conducted by the National Federation of Independent Business.
  • Partly due to cost, only 49 percent of small employers offer health insurance, compared with 98 percent of large companies, according to the U.S. Department of Labor.
  • Since 2000, premiums paid by small business employees have risen an average of 13 percent a year, compared with 11 percent for those working for large businesses, according to the Kaiser Family Foundation.
  • Currently, one in five individuals lack insurance at some point each year, and premiums have seen double-digit increases for three years in a row.

The Senate is expected to take up the matter as part of a broader health care package. However, groups ranging from Blue Cross and Blue Shield to state health commissioners are opposed because the national AHPs would operate under federal, not state, regulations.

Source: Editorial, "Why prospects for reforming health care look so dim," USA Today, January 23, 2004.


Browse more articles on Health Issues