Two key bills were introduced in the Senate last week dealing with health care and aimed at small-group market reform. Both bills give hat-tips to past proposals and aim to provide compromise language in order to address the ever-increasing numbers of small-business uninsured.

Small Business Health Options Program
Sens. Richard Durbin (D-Ill.), Olympia Snowe (R-Maine), Blanche Lincoln (D-Ark.) and Norm Coleman (R-Minn.) introduced a bill that would establish national and state-run purchasing pools for small-employers, including the self-employed. The legislation, the Small Business Health Options Program (SHOP) Act (S. 2795), is an amalgamation of legislation proposed in previous congresses by the current bill’s sponsors.

Specifically, the bill would develop a pooling mechanism under the Department of Health and Human Services (HHS) that would allow insurance companies to sell across state lines by 2011 so long as they don’t use health status in determining health insurance rates. By 2013, the SHOPs will transition to rating rules based on NAIC recommendations for adjusted community rating using age, geography, industry and tobacco use as the only characteristics allowable for rating purposes.

The bill establishes that the benefits offered would initially follow a basic plan to be established by the Institutes of Medicine (IOM). The Government Accountability Office (GAO) will appoint a small business health board to oversee implementation and make changes or updates to the SHOP plans, with all votes requiring a two-thirds majority. The State Insurance Commissioners would retain their oversight of all SHOP plans sold in their state regarding solvency, adequacy, claims procedures, ratings and complaints.

States would be allowed to opt-out of the national pool, provided they reform their own insurance ratings to no longer use health status as a rating characteristic, and create a state pool. SHOPs and state pools will have a one-stop place to get insurance information—similar to the Connector in Massachusetts—and trade associations would be allowed to provide this kind of information for their members. Associations would not, however, be allowed to offer the insurance themselves. The legislation establishes that by 2013, employees would be allowed to choose their own health plans.

The proposal would create a $1,000 per-employee tax credit for small businesses that participate in a state-run or national pool. In order to qualify for the tax credit, small businesses with fewer than 50 employees must pay at least 60 percent of the premium. The credit will kick-in for businesses with fewer than 10 employees where the employer gets $1,000 ($2,000 for family coverage) for each covered employee, and will be gradually phased-out. The credit is only available to small businesses in the state plan or national plan, or in a state that has modified their rating system to exclude health status or expanded their small group market to include self-employed individuals.

Small Business Health Plans
Sens. Michael Enzi (R-Wyo.), Ben Nelson (D-Neb.) and Judd Greg (R-N.H.) introduced legislation, the Small Business Health Plans (SBHP) Act (S. 2818) April 3, which is similar to legislation Enzi and Nelson championed during the 109th Congress. The SBHP Act would allow small businesses to pool together and purchase health care collectively. Previously, SBHPs were seen as compromise language for NSBA-opposed Association Health Plan (AHP) language.

S. 2818 would allow small businesses to band together in purchasing health care through established trade associations who contract with an insurance carrier to provide a benefits package. If purchased through the associations, small businesses would be allowed to choose lower-cost coverage options free from the some the state benefit mandates. State insurance commissioners would maintain oversight of SBHPs.

Although the bill has not yet been published, it is expected to include key pieces from its’ previous iteration, including the creation of federal rating rules, allowing insurance companies as well as the SBHP to offer packages outside the state mandates or “benefit-light” so long as another “benefit-rich” plan is also offered by that insurer. The bill is also likely to include a benefit package that is based on benefits that a certain number of states require.

In the last several years, there have been a handful of prominent small-group reform bills introduced, including controversial AHPs which failed to move, the Enzi-Nelson compromise language and a Lincoln-Durbin proposal that would allow small businesses to purchase into the Federal Employee Health Benefits Program (FEHBP). While NSBA applauds the recent compromise efforts behind, and introduction of, both the SHOP and SBHP bills, prospects for passage remain murky during the 110th Congress as the 2008 presidential and congressional campaigns are heavily underway. Such broad legislation is always difficult to enact, but even more so in an election season.