Lack of competition in health insurance market affects small businesses' benefits

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Sen. Kit Bond stated April 30 that the General Accounting Office has found a "disturbing concentration" of market power in small group health insurance, confirming suspicions that there is little competition to drive down costs and bring health insurance within financial reach of most small businesses and their employees. |ret||ret||tab|

"You do not need to be an economist to understand that when competition in health insurance is anemic, those who need coverage the most are going to suffer from high costs and few choices," said Bond, who is ranking member of the Senate Committee on Small Business and Entrepreneurship. |ret||ret||tab|

"Small businesses desperately need Fortune 500 health benefits health insurance that is competitively-priced and of comparable quality to the plans big businesses routinely offer their employees. But they will not be able to as long as one or two insurers control the market." |ret||ret||tab|

According to a new GAO report, the five largest carriers, when combined, represented three-quarters or more of the market in 19 of 34 states supplying information. They also represented more than 90 percent of the market in seven of those states. |ret||ret||tab|

In 25 states, the GAO identified a Blue Cross and Blue Shield carrier as the largest insurer offering health insurance in their small group markets and, in all but one of an additional 12 states, a BCBS carrier was among the five largest in the market. |ret||ret||tab|

Bond requested the GAO review in response to frequent complaints from small-business owners that poor competition in small group markets has inflated costs and limited choice for insurance coverage. |ret||ret||tab|

Bond said the problem goes to the heart of the nation's 40 million individuals who are uninsured. Although it is widely thought that the crisis of the uninsured stems from unemployment, about 60 percent, or 24 million individuals, without health insurance are employed or married to someone who is employed. |ret||ret||tab|

"It appears that the only solution to the problem is for Congress to pass Association Health Plans, which would enable small businesses across the country to pool together and access health insurance through their membership with a bona fide trade or professional organization," he said. |ret||ret||tab|

"Basic health care, which Fortune 500 employees take for granted, is at stake in the battle for national AHPs. This is about expanding access to services such as prenatal care for expecting mothers and vaccinations for preschool-bound children," Bond added. |ret||ret||tab|

An AHP provision has been passed by the House of Representatives in HR 2563, the "Bipartisan Patient Protection Act," but similar legislation has not passed the Senate. Bond is co-sponsor of the Senate bill, S858, the "Small Business Health Fairness Act," which would change federal law to allow national AHPs. |ret||ret||tab|

Currently, AHP plans only are available in some states. Moreover, AHPs now in operation cannot provide service to subscribers in other states, severely limiting their ability to draw enough customers to lower health insurance rates and spread risks. |ret||ret||tab|

In a previous GAO report, also prepared at Bond's request, investigators found that: "While small and large employers generally paid, on average, about the same amount for health insurance coverage, small employers received less value for their premium dollars . Also, small employers tended to receive slightly fewer covered benefits for the same premiums paid by large employers."|ret||ret||tab|

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Small-business taxation|ret||ret||tab|

In other small-business news, the publication of new cash accounting rules will result in significant tax simplification for more than 500,000 small firms and will remove the persistent confusion that has surrounded cash-accounting in the small-business sector, according to a press release from Bond|ret||ret||tab|

The Internal Revenue Service published the new rules in Revenue Procedure 2002-28. |ret||ret||tab|

"In the real world, this will free the independent home builder or repairman from having to account for every nail, board, can of paint or shingle used over the course of a year," Bond said. "And it will significantly simplify the lives of other service providers, like dentists and veterinarians, who must use some merchandise as part of the service they provide."|ret||ret||tab|

In letters sent to Treasury Secretary Paul H. O'Neill, IRS Commissioner Charles O. Rossotti, and Assistant Secretary Mark Weinberger, Bond and Congressman Wally Herger, R-Calif., hailed the decision to simplify small business accounting procedures and praised the efforts of the two agencies to address concerns raised by many small businesses and trade associations during the comment period on the initial guidance. |ret||ret||tab|

Under the new, simplified accounting rules, most small service providers with average gross receipts of $10 million or less will be allowed to use the cash method of accounting rather than costly and time-consuming accrual and inventory methods. [[In-content Ad]]