Small employers are getting squeezed by rising health insurance premiums. Part of the problem is that state health insurance regulations are helping to drive those premiums upward. Last year, the Cato Institute published a study by Duke University professor Chris Conover that estimated certain state health insurance regulations cost Americans $46 billion each year, in excess of any benefits they provide.
What small employers find particularly galling is that large employers can avoid these costly regulations by opting for federal regulation, which is relatively light in comparison. Small employers can’t do that, which puts them at a competitive disadvantage.
House Republicans want AHPs to allow certain organizations — typically Washington lobbying groups — to sell health insurance to their member companies. That insurance would be regulated by Washington. It would therefore be more affordable than state‐regulated insurance — at least on day one.
Unfortunately, House Republicans don’t seem to be thinking beyond day one. Federal regulation may seem like a good deal today, but it is almost certain to become more costly with AHPs.
If federal health insurance regulation is currently less burdensome than state regulation, it is because Washington has not yet been lobbied by regulation‐seeking special interests the way that state capitols have. Once AHPs make Washington responsible for regulating an even greater share of the market, however, those special interests will redouble their efforts in Washington.
The special interests are likely to succeed. In the 1990s, congressional Republicans showed a surprising willingness to ramp up federal health insurance regulation. The laws they passed have already made coverage less affordable. Consumers only narrowly avoided additional federal regulations in the late 1990s because the pro‐regulation forces overreached — by seeking a right to sue employers.
As Thomas Jefferson wrote, “The natural progress of things is for liberty to yield and government to gain ground.” If AHPs encourage special interests to focus their attention on Washington, it would only be a matter of time until federal regulation became more costly than state regulation is today.
Thus AHPs are yet another example of House Republicans abandoning their federalist, small‐government principles. AHPs move power from the states to Washington. Those additional federal regulations would be even harder to dislodge than state regulations because they would be farther removed from the people they affect. Therefore, the effort to ease the regulatory burden on small businesses would actually increase it. And with private health insurance increasingly less affordable, there would be even greater pressure on Congress to expand government health programs.
House Republicans’ devotion to AHPs is particularly puzzling when there is a much better alternative on the table. Rep. John Shadegg (R‐Ariz.) has sponsored legislation (H.R. 2355) that would allow individual consumers to purchase health insurance across state lines, and in essence choose which state regulates their health insurance.
Shadegg’s bill would take power away from state legislators and regulators. But rather than give it to Washington, Shadegg would give that power to consumers. Such a move would sidestep costly state regulations that now make health insurance unaffordable for millions.
Under Shadegg’s approach — call it interstate commerce in health insurance — states would have to compete for the “business” of consumers and health insurers by offering a regulatory environment that doesn’t unnecessarily increase the cost of coverage. Thus while AHPs would put increased regulation on auto‐pilot, interstate commerce in health insurance would put de‐regulation on autopilot.
Shadegg’s approach should be expanded to give the same choice to employers that it would give to individual consumers. Unfortunately, the Shadegg bill doesn’t have as much support as AHPs, which boasts a coalition of over 150 business associations. Many of these are lobbying groups that see AHPs as a huge opportunity to recruit and retain members.
As in years past, the push for AHPs is likely to end in a stalemate. The legislation is likely to get stalled in the Senate, again by a coalition of Democrats and some Republicans. Here’s hoping that House Republicans rediscover their principles before Senate Democrats discover their opportunity.