HealthMarts, HIPCs, MEWAs, and AHPs: A guide for the perplexed

Health Affairs

Volumn 20, Issue 1, 2001, Pages 142-153

  Hall, Mark A ^a   Wicks, Elliot K ^b   Lawlor, Janice S ^c  

^a WAKE FOREST SCHOOL OF MEDICINE   (United States)

^b Economic/Social Research Institute   (United States)

^c Wake Forest ^*  (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; COST CONTROL; ECONOMIC ASPECT; ECONOMICS; EVALUATION; GOVERNMENT; HEALTH CARE COST; HEALTH CARE ORGANIZATION; HEALTH CARE POLICY; HEALTH INSURANCE; HOSPITAL PURCHASING; HUMAN; INSURANCE; LEGAL ASPECT; ORGANIZATION AND MANAGEMENT; UNITED STATES;

COST SAVINGS; ECONOMIC COMPETITION; GROUP PURCHASING; HEALTH BENEFIT PLANS, EMPLOYEE; HEALTH CARE COALITIONS; HEALTH CARE REFORM; HEALTH CARE SECTOR; HUMANS; INSURANCE POOLS; INSURANCE SELECTION BIAS; STATE GOVERNMENT; UNITED STATES;

EID: 0035235577     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.20.1.142     Document Type: Article

References (39)

1. For an introductory discussion, see M.A. Hall, "The Geography of Health Insurance Regulation," Health Affairs (Mar/Apr 2000): 173-184.
2. These proposals first came to widespread attention through a bill (H.R. 995) in the 104th Congress championed by Rep. Harris Fawell (R-IL) in 1995. Recently, the most prominent version has been sponsored by Rep. Jim Talent (R-MO), chair of the House Small Business Committee, and these ideas were included in George W. Bush's campaign proposals. This legislation gained notoriety in October 1999 when conservative Republicans in the 106th Congress attached it to the bipartisan Patients' Bill of Rights (H.R. 2990), a move President Bill Clinton described as a "poison pill" and "legislative sleight of hand" calculated to defeat the bill. Similar legislation has also been highly controversial at the state level, most notably in California. See J. Yegian, Size Matters: The Health Insurance Market for Small Firms (Aldershot, England: Ashgate Publishing, 1999).
3. By "risk premium," we mean the portion of the premium that compensates for the pure risk-bearing function - that is, the uncertainty over the extent of claims.
4. See also the Health Insurance Market Reform Study's Web site, ; and E.K. Wicks, M.A. Hall, and J.A. Meyer, "Barriers to Small-Group Purchasing Cooperatives," March 2000, (11 September 2000).
5. See also the Health Insurance Market Reform Study's Web site, ; and E.K. Wicks, M.A. Hall, and J.A. Meyer, "Barriers to Small-Group Purchasing Cooperatives," March 2000, (11 September 2000).
6. Congressional Budget Office, Increasing Small-Firm Health Insurance Coverage through Association Health Plans and HealthMarts, January 2000, (11 September 2000); and Len Nichols, principal research associate, Urban Institute testimony before the House Commerce Subcommittee on Health and Environment, 16 June 1999, (II September 2000). See, generally, Mary Nell Lehnhard, senior vice-president, Blue Cross and Blue Shield Association, testimony before the House Committee on Small Business, 16 February 2000, (11 September 2000).
7. Congressional Budget Office, Increasing Small-Firm Health Insurance Coverage through Association Health Plans and HealthMarts, January 2000, (11 September 2000); and Len Nichols, principal research associate, Urban Institute testimony before the House Commerce Subcommittee on Health and Environment, 16 June 1999, (II September 2000). See, generally, Mary Nell Lehnhard, senior vice-president, Blue Cross and Blue Shield Association, testimony before the House Committee on Small Business, 16 February 2000, (11 September 2000).
8. Congressional Budget Office, Increasing Small-Firm Health Insurance Coverage through Association Health Plans and HealthMarts, January 2000, (11 September 2000); and Len Nichols, principal research associate, Urban Institute testimony before the House Commerce Subcommittee on Health and Environment, 16 June 1999, (II September 2000). See, generally, Mary Nell Lehnhard, senior vice-president, Blue Cross and Blue Shield Association, testimony before the House Committee on Small Business, 16 February 2000, (11 September 2000).
9. For a sampling of recent articles pro and con on related topics, see P. Ketsche and W. Custer, "The Effect of Marginal Tax Rate on the Probability of Employment-Based Insurance by Risk Group," Health Services Research 35, no. 1 (2000): 239-252; and D. Goldman, J. Buchanan, and E. Keeler, "Simulating the Impact of Medical Savings Accounts on Small Business," Health Services Research 35, no. 1 (2000): 53-75. See generally E. Wicks and J. Meyer, "Small Employer Health Insurance Purchasing Arrangements: Can They Expand Coverage?" May 1999, (11 September 2000).
10. For a sampling of recent articles pro and con on related topics, see P. Ketsche and W. Custer, "The Effect of Marginal Tax Rate on the Probability of Employment-Based Insurance by Risk Group," Health Services Research 35, no. 1 (2000): 239-252; and D. Goldman, J. Buchanan, and E. Keeler, "Simulating the Impact of Medical Savings Accounts on Small Business," Health Services Research 35, no. 1 (2000): 53-75. See generally E. Wicks and J. Meyer, "Small Employer Health Insurance Purchasing Arrangements: Can They Expand Coverage?" May 1999, (11 September 2000).
11. For a sampling of recent articles pro and con on related topics, see P. Ketsche and W. Custer, "The Effect of Marginal Tax Rate on the Probability of Employment-Based Insurance by Risk Group," Health Services Research 35, no. 1 (2000): 239-252; and D. Goldman, J. Buchanan, and E. Keeler, "Simulating the Impact of Medical Savings Accounts on Small Business," Health Services Research 35, no. 1 (2000): 53-75. See generally E. Wicks and J. Meyer, "Small Employer Health Insurance Purchasing Arrangements: Can They Expand Coverage?" May 1999, (11 September 2000).
12. We also sidestep other important aspects of the debate over these proposals, such as the adequacy of the solvency standards and the shift from state to federal regulation.
13. E. Wicks and M. Hall, "Purchasing Cooperatives for Small Employers: Their Performance and Prospects," Milbank Quarterly 78, no. 4 (2000).
14. CBO, Increasing Small-Firm Health Insurance Coverage; and S.H. Long and M.S. Marquis, "Pooled Purchasing: Who Are the Players?" Health Affairs (July/Aug 1999): 105-111.
15. CBO, Increasing Small-Firm Health Insurance Coverage; and S.H. Long and M.S. Marquis, "Pooled Purchasing: Who Are the Players?" Health Affairs (July/Aug 1999): 105-111.
16. Hearings on Association Health Plans, before the House Committee on Small Business, 10 June 1999, (11 September 2000).
17. G.A. Jensen and M.A. Morrisey, "Employer-Sponsored Health Insurance and Mandated Benefit Laws," Milbank Quarterly 77, no. 4 (1999): 425-459; and M.S. Marquis and S.H. Long, "Recent Trends in Self-Insured Employer Health Plans," Health Affairs (May/June 1999): 161-166.
18. G.A. Jensen and M.A. Morrisey, "Employer-Sponsored Health Insurance and Mandated Benefit Laws," Milbank Quarterly 77, no. 4 (1999): 425-459; and M.S. Marquis and S.H. Long, "Recent Trends in Self-Insured Employer Health Plans," Health Affairs (May/June 1999): 161-166.
19. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
20. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
21. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
22. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
23. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
24. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
25. See R. Tillman, Broken Promises: Fraud by Small Business Health Insurers (Boston: Northeastern University Press, 1998); F. Damon, "Multiple Employer Trusts: A Historical Perspective from ERISA to the California Approach," Journal of Insurance Regulation 2, no. 1 (1983): 20-29; U.S. General Accounting Office, Employee Benefits: MEWA Regulation, Pub. no. GAO/HRD 92-40 (Washington: GAO, March 1992); K. Polzer and J.Jones, "Multiple Employer Purchasing Groups (METs, MEWAs, HINs, HIPCs): The Challenge of Meshing ERISA Standards with Health Insurance Reform," National Health Policy Forum Issue Brief no. 604 (Washington: NHPF, 1992); K. Polzer, "Preempting State Authority to Regulate Association Plans: Where Might It Take Us?" National Health Policy Forum Issue Brief no. 707 (Washington: NHPF, 1997); A. Martin et al., "MEWAs: An Exception to ERISA Preemption: Why, What, and When" (American Law Institute-American Bar Association, February 1992), C724, 363; and C. Forrelli, R. Jones, and C. McHugh, "Regulation of Multiple Employer Welfare Arrangements: The Dilemma of Dual Federal/State Regulation," FICC Quarterly (Fall 1995): 45-63.
26. See Polzer, "Preempting State Authority."
27. M. Hall, "The Structure and Enforcement of Health Insurance Rating Reforms," Inquiry 37, no. 4 (2001).
28. The legislation creates much ambiguity. It states that HealthMarts are subject to state small-group rating rules but that policies must be rated on a "product-specific" basis, without defining what this means. One interpretation is that insurers are required to use a different rating structure for plans they sell only within a HealthMart rather than including these products within their overall small-group rating structure, as state laws require. The purpose may be to allow HealthMarts to pass on savings from leaner benefits than are offered elsewhere in the market, but, as discussed below, the effect may also be to allow insurers to reflect the different health status of those who join a HealthMart pool.
29. J. Robinson and L. Gardener, "Adverse Selection among Multiple Competing Health Maintenance Organizations," Medical Care 3, no. 12 (1995): 1161-1175; and J. Newhouse, "Reimbursing Health Plans and Health Providers: Selection versus Efficiency in Production," Journal of Economic Literature (September 1996): 1236-1263.
30. J. Robinson and L. Gardener, "Adverse Selection among Multiple Competing Health Maintenance Organizations," Medical Care 3, no. 12 (1995): 1161-1175; and J. Newhouse, "Reimbursing Health Plans and Health Providers: Selection versus Efficiency in Production," Journal of Economic Literature (September 1996): 1236-1263.
31. Here we use "community rating" in a looser sense to include both pure and modified community rating, as well as rating bands that allow some flexibility on price. The distinction we are drawing is not the degree of rating flexibility, but rather whether the rating structure is based on the entire community or instead on the claims experience of a specific pool or product.
32. M. Hall, "An Evaluation of Vermont's Health Insurance Reform Law," Journal of Health Politics, Policy and Low (February 2000): 101-131.
33. Kentucky Department of Insurance, Market Report on Health Insurance (Frankfort: KDI, April 1997).
34. M. Hall, "An Evaluation of New York's Health Insurance Reform Law," Journal of Health Politics, Policy and Law (February 2000): 71-99.
35. Hall, "The Structure and Enforcement."
36. Another study found no difference in one large insurer's claims over six years between small groups that were underwritten and those that were guaranteed issue. J. Glazner et al., "The Questionable Value of Medical Screening in the Small-Group, Health Insurance Market," Health Affairs (Summer 1995): 224-234.
37. Technically, the same is true for HealthMarts as well as AHPs, but unlike AHPs, HealthMarts may not restrict membership, so selling through them is equivalent to selling to the entire small-group market.
38. This flexibility already exists in a number of states, primarily in the Midwest. Hall, "The Geography of Health Insurance Regulation." In essence, the AHP proposal seeks to extend the more lenient regulatory approach to all states.
39. M. Hall, "The Impact of Health Insurance Market Reforms on Market Competition," American Journal of Managed Care (January 2000): 57-65.