Chairman STARK. Mr. Stowe.

STATEMENT OF ARTHUR STOWE, PRESIDENT, PRINTING INDUSTRIES OF MARYLAND, ON BEHALF OF THE TRADE ASSOCIATION HEALTHCARE COALITION

Mr. STOWE. Thank you, Mr. Chairman.

Chairman STARK. This is Maryland. Congressman Cardin has all of his constituents and his friends in here today. He told me he is up in Annapolis working. Is Dick Heintz a member of the Printing Industries of Maryland?

Mr. STOWE. Yes, sir.

Chairman STARK. My neighbor.

Mr. STOWE. Thank you

Chairman STARK. Go ahead. Did you enjoy your meeting with Ira Magaziner?

Mr. STOWE. Yes, sir.

Chairman STARK. Tell us what you learned.

Mr. STOWE. I will tell you later as developments occur whether we truly enjoyed it or not.

Thank you.

The Trade Association Health Care Coalition appreciates the opportunity to testify before the committee. I am Arthur Stowe, president of the Printing Industries of Maryland. Our association is a member of the Trade Association Health Care Coalition, and we are also appearing on behalf of the Association Health Plan Alli

ance.

As in our January meeting with the senior advisor to the President on health care, Dr. Magaziner, our theme today that we want to highlight is to describe the existing association group health benefits plans and point out their uniqueness. We would like to become an integral part of any future American health care system helping to secure comprehensive health care benefits for all Ameri

cans.

Until now, drafters of Federal and State legislation have not focused on and in some instances have not even recognized the existence of group health care benefits provided to small employers under the management of trade and professional associations. This is quite ironic because association plans have for 5 decades been the champions of small employer health plans when the group health needs of small employers were largely underserved or unserved.

The concept of aggregating small employers into professionally administered health risk pools is not new. The association plans have proved to be an effective and economic approach for small employers to provide their employees with access to group health insurance when it is otherwise unavailable.

The associations who belong to the Trade Association Health Care Coalition and the Association Health Plan Alliance are concerned about several aspects of the health care reform bills currently before Congress. If those bills become law they will jeopardize or completely eliminate effective and beneficial association small employer health programs, and will have a detrimental impact on the very groups the law is intended to serve.

Chairman STARK. Mr. Stowe, If I solve your problem, can I interrupt you?

Mr. STOWE. Certainly.

Chairman STARK. We had another person testify at a previous hearing about association programs and one of the things that compounds your problem, some associations, and rightfully so, like the Association on Health Care policies because they get members.

It is a sales tool to get people to join their association, which I think is fine. AARP is one of them. They sell a lot of insurance, they get a lot of people to sign up because they like it. I think that is a reasonable thing to do. I can see that the President's plan would put you out of business in that area. Not to worry.

First of all, insurance reform would probably put you largely out of business. In other words, if every insurance company in the country had to take any one of your members on open enrollment and community rating, you can't offer much of a price break except maybe the bookkeeping.

My guess is that there will always be a need for supplemental programs much as medigap is what is sold by AARP and it is a very good product. My mother buys it; it is worthwhile. So my guess is, while it is too early to predict what form the legislation will take, that there will be a market and/or a need, which creates a market often, for associations to be able to offer something special, if you will, to their members as both a reward for belonging or indeed an inducement for joining and allow you to use your collective purchasing power to get a little bit of a bargain for it.

I can't tell you what form that is going to take, but I can tell you the committee is aware of your concerns and I think that in the course of this legislation, they will be met. Fair grounds for interrupting?

Mr. STOWE. Fair enough.

Chairman STARK. All right.

Mr. STOWE. We have submitted full written testimony anyway. Thank you very much for listening.

[The prepared statement follows:]

STATEMENT OF ARTHUR STOWE

PRESIDENT, PRINTING INDUSTRIES OF MARYLAND

ON BEHALF OF THE TRADE ASSOCIATION HEALTHCARE COALITION

The Trade Association Healthcare Coalition appreciates this opportunity to testify before the Health Subcommittee. I am Arthur Stowe, and I am the President of the Printing Industries of Maryland. We are one of the member associations of the Trade Association Healthcare Coalition, but we are also appearing on behalf of the Association Health Plan Alliance. As in our January 11, 1994 meeting with the Senior Advisor to the President on Health Reform, Dr. Ira Magaziner, the theme of our comments today will be to briefly describe how existing association group health benefit plans are uniquely qualified to become an integral part of the future American health system helping to guarantee universal and secure healthcare benefits to all Americans.

Until now, drafters of federal and state legislation have not focused on, or in some instances, even recognized the existence of group healthcare benefits provided to small employers under the management of trade and professional associations. This is ironic because association plans have, for five decades, been the champions of small employer plans when the group health needs of these groups were largely unserved. The concept of aggregating small employers into professionally administered health risk pools is not new. Association plans have provided numerous number services and proved to be an effective and economical approach for very small employers to provide their employees with access to group health insurance, when it was otherwise unavailable.

The member associations who belong to the Trade Association Healthcare Coalition are very concerned about several aspects of healthcare reform bills currently before Congress. If those bills become law, they may jeopardize or completely eliminate effective and beneficial association small employer health programs and have a detrimental impact on the very groups the law is intended to serve.

In a concept very similar to what many reformers consider to be "reform", association plans have, for half a century, combined employers into health insurance pools of employees and provided the security of health care coverage to their families under a master insurance policy or association Trust.

Gaining leverage with insurers and health care providers through their combined numbers, association plans have given small employers the advantages of economy and scale, professional plan management and access to coverage for their employees and dependents. If it were not for these plans, these advantages would have been denied employees of small business and enjoyed only by those who work for large employers.

Recent estimates are that 4-6 million Americans are covered under association programs. In most instances, these programs have provided valuable health care benefits to small urban firms or in many cases, rural employers to which managed care networks, (HMO's, PPO's) are not available due to meager populations. Had it not been for the existence of association plans, the ranks of involuntary uninsureds would have been swelled a long time ago because of the prohibitive cost of obtaining health insurance for small businesses.

According to a national survey conducted in 1992 by the American Society of Association Executives, 779 responding associations reported 1,991 group premiums paid $6.2 billion. This amount is larger than the total health care premiums of Prudential, the largest health insurance carrier in the U.S.

Association plans have worked hard to keep up with large employers to manage care and to find new ways to deliver excellence in health benefits while slowing the increased cost of health care. Associations have been in the forefront of increasing access to their plans for those with preexisting conditions, thereby reducing the number of involuntarily uninsured employed within their group membership.

These industry trade groups are not necessarily limited to select groups of low-risk individuals who are not likely to need health care. Since most of the trade groups are industry-wide, they include a mix of worker occupations such as mechanics, maintenance and construction workers as well as managers, accountants and clerical workers.

Most small employer plans are fully-insured by insurance companies and are not exempt from the state mandates as are large employers, most of which are self-insured. Thus, small employers unknowingly have had extra health costs piled onto them from their legislators through mandated benefits.

Much of the additional healthcare premium costs for small employers is attributable to state government mandates and premium taxes on small business plans that do not apply to selfinsured plans of large corporations.

These bona fide trade and professional group programs have unfairly been confused with the bad publicity generated in the media by undesirable practices of some very aggressive small group insurance companies. The Trade Association Healthcare Coalition and the Association Health Plan Alliance want to distinguish our plans from those insurance companies who have profiteered through abusive tactics at the expense of small businesses, their employees and families.

We want to set the record straight and not be confused with those unscrupulous small group health insurer sales schemes which attempt to gain profits by limiting membership to low-risk employers and pick and choose among employees or even which, unfortunately, defraud insureds in a premeditated "hit and run" once an employee becomes seriously ill with a large claim. These practices and schemes should be eliminated.

While the media has publicized certain unscrupulous operators of small group insurance plans that load on as much as 40% for administration and sales commissions, large association plans and their insurers typically have total expense loads of under 15%, net of state premium taxes.

The "Managed Competition" concept being considered in Congress includes the creation of Health Alliances which are new federal agency entities acting as quasi-public regional purchasing groups. The purchasing groups offer Accountable Health Plans (AHP), which are approved by the federal government and contain a comprehensive standardized benefit plan.

The regional purchasing group concept envisions one health alliance in each region to buy standardized basic health insurance for all those not on Medicare. These government alliances would have such large numbers of insureds that they could negotiate prices to the medical community.

Legitimate trade and professional associations are by definition "true purchasing groups" and are in fact the forerunners to the proposed Health Alliances. Does it not make sense to expand upon those entities which have already proved to be successful (i.e. trade and professional associations as purchasing groups)? By leveling the playing field through the elimination of barriers to access and pre-existing restrictions, you return associations to their original purpose and further promote and encourage bona fide plans.

By contrast, the large businesses may go around the Alliance and can negotiate as a corporate alliance and obtain their own costs or insurance rates.

To be part of the managed competition system, Association Alliance plans should be "qualified" on a basis similar to that of qualifications set forth by the Internal Revenue Service for pensions. They would also need to satisfy the standardized basic plan requirements and provide complete access and portability of plans within their membership's limitations.

Qualified association plans are not taking the position of wanting to be "exempt" from the small group health benefit reform. Rather, they welcome the aspects of reform which will eliminate unscrupulous practices and offer choice and access to their membership. Association plans want to be a part of the future healthcare delivery system. They offer a track record which should be expanded upon rather than reinventing the wheel through quasi-governmental alliances. The Trade Association Healthcare Coalition supports the goal of universal coverage. The evidence is clear that acute health care costs are shifted to those with insurance when uninsured individuals arrive at hospital emergency rooms for treatment. They receive treatment, but trigger a circle of cost shifting that impacts all of the stakeholders in the health care system. If all

Americans had healthcare coverage, the motivation for cost shifting would be greatly diminished.

Small businesses with less than one hundred employees are estimated to make up ninety-five percent of all employers. They employee more than fifty percent of the private sector labor force and are the greatest source of growth in new jobs in our economy.

Association plans of small employers could prosper under Universal Healthcare and their existence would encourage all potential participants to enroll in the association's multiple health care offerings.

We support the concept of associations as voluntary HIPC's to maintain and even expand the concept of healthy competition and quality health care delivery to the American people. We support the concept of rating based upon the unique association community. This modified form of internal community rating would be more effective than flat community rating. It would allow associations to manage their programs with factors such as geographic area, age, family composition and wellness factors within each association considered as its own community.

We also support the concept of freedom of choice, with the employees ability to select from a variety of health plans as offered by its association purchasing group. Options including traditional fee for service plans. PPO's and HMO's as available by geographic locale within a given association. Associations, like large employers, have extensive experience in dealing with insurance providers. Associations also have the organizational infrastructure with which to advise their members and employees on health care alternatives. In addition to being an information and data gathering center, associations have the staff available to monitor a plan's performance and communicate with members to achieve an improved health care financing and deliver system. We are concerned, however, that any cap on contributions for employers with less than 75 employees, as included in the Administration bill, may prove to be transient. The financial impact to the individual businesses of mandated coverage of all employees, combined with as much as 80% premium payment by the employer, could drastically reduce the numbers of small businesses who could survive such costs.

Associations are uniquely structured to be a part of any new or revised health care delivery system. Because they are already structured to represent their members in other areas, they possess the infrastructure, administrative mechanisms and experience to unify employers and employees into effective consumers of health services. Employers who join purchasing groups or cooperatives organized by associations along industry lines can offer employees access to high quality private health coverage at lower costs, with an expanded number of options.

Associations should be organized to function as large employers or as purchasing groups. Such associations can offer a wide variety of approved health plans and managed care arrangements (insured arrangements, Blue Cross/Blue Shield, HMO`s, self-insured) to employers and employees within an industry purchasing group. In this capacity, associations can also distribute

information, provide price data and offer qualitative comparisons between health plans.\

Associations functioning as purchasing groups can also develop common statistical databases by major industry groupings for claims, premium contributions and utilization of health care services.

Association purchasing groups based on industry lines also offer the best opportunity to integrate coverage and provide statistical data for work related injury, offering a possible solution for the current and growing country wide Workers Compensation benefits crisis.

Such information could be made available for consumer education as well as to insurers for the purpose of risk management, rate negotiations, treatment guidelines, quality control and health plan selection.

In summary, qualified functional industry based associations have been successfully providing comprehensive health benefit programs, as well as many other services, to their Members for more than 50 years. The systems for administration, expertise in negotiation, data collection and communication are all in place and operational. It appears essential that the Congress take into consideration the positive purchasing successes of association programs and retain them as a viable part of the future health care delivery system.