AHPs Would Subject Consumers to Increased
 Health Care Fraud and Health Plan Failure

(WASHINGTON) – At a press briefing, a bi-partisan group of Members of Congress, Representatives Andrews (D-NJ), Morella (R-MD), and Pomeroy (D-ND), called for the defeat of AHP legislation included in the House version of the "Patients Bill of Rights."  The group said adopting such legislation would put consumers and small business at risk of fraud and health plan failure.  The group also noted that allowing such legislation to become law would exempt consumers from mandates adopted by states and thus deny them access to the benefits they were previously guaranteed.

"Consumers lose two ways with this proposal," said Representative Rob Andrews.  "First, mandates specifically adopted to protect women, children and other groups with special needs would no longer be applicable to AHPs.  This would result in a loss of benefits for these groups.  Second, states would no longer have oversight for these groups, leaving it up to the federal Department of Labor, a department that has neither the desire nor resources to regulate AHPs.  This change in oversight is the most troubling as it puts consumers at increased risk for health plan failure.  As a result, we would return this country to a time nearly 20 years ago when shady operators bilked thousands of people out of hard earned premium dollars and left them high and dry when it came time to pay the doctor bills," Andrews said.

Congressman Earl Pomeroy, a former state insurance commissioner from North Dakota and former president of the National Association of Insurance Commissioners, expressed his concern over the impact exempting AHPs from state regulation would have on small employers.  "In the early 80s similar exemption from state insurance regulations led to a crack down on widespread fraud in Association Health Plans. Since then, additional reforms to expand coverage and guarantee access to coverage have been passed and are working. The AHP proposal would shred the protections for consumers in this market. The net result would be detrimental for small businesses and consumers. This idea is a turkey and should not be enacted."

The group highlighted the following problems with the current AHP provision:

· Minimum Net Worth/Capital Requirements are Inadequate:  Regulators require health plans to set funds aside to assure that health plan can pay future claims.  The AHP proposal caps the surplus capital at $2 million, regardless of the size of the plan.  This amount is inadequate.  Some potential association sponsors have hundreds of thousands of potential members and require much higher surplus than required for AHPs.

· Limited Ongoing Oversight:  The bill does not address the critical need to monitor plans for solvency on a continual basis.  The proposal relies on actuaries hired by the plan to perform critical oversight functions. The use of an actuary hired by the plan to perform a corrective action function is not an adequate substitute for the ongoing, impartial, external oversight provided by state regulators.

· Self-reporting of Financial Problems:  AHPs are not required to submit financial data. Only when they are on the verge of insolvency are AHPs required to report a corrective action to a regulator. However, this report is not required to be given to a regulator until up to 90 days after the AHP first determines a problem exists. The experience of the states demonstrates that when an entity gets into fiscal difficulty, things can erode very quickly.

· Department of Labor (DOL) Oversight: The DOL is given the responsibility to regulate certified AHPs yet has no experience nor desire to monitor health plan solvency.  If corrective action is needed, the bill gives DOL little ability to intervene quickly to prevent the failure of a plan. The only action available to DOL is to take a plan into trusteeship, effectively terminating the plan. This action is always seen as the last resort for a state insurance department, which has a variety of corrective measures available that can be invoked long before the plan reaches the point where a receivership is necessary. 

The AHP provision is contained as part of the House passed version of the Patient's Bill of Rights.  Rep. Rob Andrews, as a member of the House-Senate conference for that bill has pledged to work to remove that provision before the final bill is passed on to the President.