BCBSA Study By Former Federal Fraud Investigator Finds Congress At Risk Of Reinventing AHP/MEWA Debacle.

Business Editors, Health & Medical Writers

WASHINGTON--(BUSINESS WIRE)--May 8, 2002

Congressional efforts to exempt Association Health Plans (AHPs) from state regulation may ultimately reinvent the fraud and insolvency scandals of the 1980s associated with Multiple Employer Welfare Arrangements (MEWAs), according to former federal fraud investigator Eleanor Hill in a report prepared for the Blue Cross and Blue Shield Association (BCBSA) and released today in Washington, D.C.

In her report, Hill asserts that currently proposed AHP legislation "would ignore the lessons of history by creating new regulatory loopholes for some of the same types of plans that left consumers with millions of dollars in unpaid medical bills in the past."

Hill, an attorney with King & Spalding, is the former chief counsel for the Senate Permanent Subcommittee on Investigations and inspector general for the Department of Defense.

Key findings from Hill's analysis of current federal legislation designed to encourage the creation of AHPs exempt from state laws, include:

-- Exempting business insurance plans from state regulation has been tried and
failed;

-- AHP legislation would reinvent past problems with MEWAs;

-- Proposed standards for AHPs will not prevent, but would potentially
exacerbate problems; and,

-- Current regulatory vacuum would heighten the risk for fraud and insolvency.

"In recent months, more than 100,000 consumers participating in under-regulated insurance arrangements for small employers have lost their health benefits," said Mary Nell Lehnhard, senior vice president, BCBSA Office of Policy and Representation. "Knowing this sad fact it is ironic that Congress would consider legislation to foster the proliferation of AHPs, exempt from state regulations and consumer safeguards, as a solution for the nation's uninsured."

The new BCBSA report builds on previous studies that questioned the ability of AHPs to effectively deliver on the promise of providing affordable healthcare coverage for small businesses.

In a 2000 report, the Congressional Budget Office (CBO) predicted that four out of five small firms that receive coverage through AHPs would actually see their premiums increase, and, in a number of instances, actually lose benefits and further expand the rolls of the uninsured.

To further illustrate the CBO study, BCBSA also released a new state-by-state analysis to look at the aggregate number of small firm workers that would experience premium increases under the proposed AHP legislation.

For example, the review found that in California, out of 3.5 million small firm workers and their dependents, roughly 2.8 million would likely face higher premiums through participation in AHPs. The analysis was conducted by KPMG Consulting.

"It is abundantly clear that exempting AHPs from state law is not the magic bullet to eliminate the struggles of small employers facing rising healthcare costs," said Lehnhard. "We are all seeking ways to ensure greater access to affordable health benefits, but there is clearly mounting evidence to show that the proposed AHP legislation is not in the best interest of consumers or small businesses."

For a copy of the Hill report as well as the KPMG state-by-state analysis, please contact BCBSA's Jackie Fishman at 202/626-8644 or go to BCBSHealthIssues.com.

The Blue Cross and Blue Shield Association is comprised of 43 independent, locally operated Blue Cross and Blue Shield companies that collectively provide healthcare coverage for nearly 83 million - more than one in four - Americans. For more information on the Blue Cross and Blue Shield Association and its member companies, visit www.bcbs.com. For more information on Blue Cross and Blue Shield Association's policy positions and the healthcare debate, visit www.BCBSHealthIssues.com.