Here comes health care reform.

How reform will affect associations--and the health plans many of them run--remains somewhat uncertain. The time to act is now.

The stakes of health care reform are high: Americans' health insurance coverage and ways of getting health care--and the distribution of billions of dollars. Everyone has a personal stake in the results of reform, because we are all potential consumers of health care. Beyond that, association executives whose associations run insurance plans or are employers have a profound professional interest in how the reform unfolds.

Consider these facts:

* Today more than 10 million lives are covered through association insurance programs, the nation's largest health insurance market.

* Some 3,000-5,000 associations offer member health plans--about 13 percent of which are self-insured. Of the associations represented by members of ASAE, nearly 30 percent offer insurance to their members and their families.

* According to a 1992 survey sponsored by W. F. Morneau and Associates, Alexandria, Virginia, and ASAE, the total annual premium generated by plans at the 2,648 responding associations exceeded $6.2 billion in 1991.

Consider, too, that in 1992 health care costs equaled approximately 14 percent of the United States' gross national product. And in recent years about 39 million Americans were not insured at some time in a given year. Economic adviser Jane Bryant Quinn has noted that only about 7 percent chose to be uninsured; others were shut out of the existing system, often because they had a preexisting condition or could not find an affordable plan.

Meanwhile associations have run group health insurance plans successfully for some 70 years. And association plans have been especially useful for insuring the otherwise hard-to-insure employees of small businesses. Yet the very survival of the insurance plans of trade and professional associations has been threatened by provisions in the proposed Health Security Act (the Clinton plan) and other bills developed in response to it.

This summer, reform proposals and counterproposals will be under intense scrutiny and debate as an informal deadline for passage of legislation approaches. Many commentators on health care reform cite October as the political 11th hour for legislation to pass--because congressional elections are coming up in November. As the May 3 Washington Post "Health" section noted, "Unless there is a major shift in public opinion, most lawmakers say that the failure to enact health care legislation by that time would greatly fuel the voters' anti-incumbent feeling that Congress is stalled by gridlock."

ASAE influences the debate

ASAE has been taking, and continues to take, actions to make the case for continuation of association group health insurance plans. Admittedly, many lawmakers on Capitol Hill still are not aware of associations' role and scope of activity in the insurance industry. But, says Chet Merritt, vice president of ASAE's Services Corp., as more and more legislators learn about association plans, they want to keep what works, although they probably won't allow creation of new plans.

ASAE's Insurance Education Committee chair, David B. Kreidler, CAE, the executive vice president and chief executive officer of the Eastern Building Material Dealers Association, Media, Pennsylvania, and Donald Dressler, CAE, president, insurance services, with the Newport Beach, California-based Western Growers' Association (who becomes the chair next month) have led several effective efforts to communicate the value of association plans. For example, Kreidler presented testimony before the House Ways and Means Subcommittee on Health in February.

ASAE also has made headway through its work with The Association Healthcare Coalition, Washington, D.C. At TAHC's invitation, several ASAE representatives discussed association plans with White House Senior Policy Adviser Ira Magaziner earlier this year (see ASSOCIATION MANAGEMENT, March, p. 7). Kreidler credits TAHC for getting both the White House and the Hill to begin recognizing sponsors of association plans as important contributors of ideas to the national conversation on health care reform.

Through issue briefings held in November and May, ASAE has put association plan representatives face to face with other key players in health care reform. Representatives of doctors, lawyers, insurers, nurses, hospitals, accountants, benefits administrators, and managed care professionals offered their views. Members of the White House staff, cabinet, Senate, and House of Representatives all had a say. And in turn, association plan representatives were able to explain their plans' operations and worth.

Proposed plans

America spends more on health care than most countries spend on health care. Sometimes higher quality of care or service justifies the difference. But too often, higher costs here reflect systemic problems and inefficiencies.

To resolve those problems and lessen or eliminate the inefficiencies, the health care proposals under discussion may differ about how to implement the following aspects of reform, but they tend to agree on the desirability of the following components:

* Standard benefits to allow for comparability among basic insurance plans.

* Portability of benefits to offer more flexibility to employees who now dare not change jobs for fear that they or family members will not be insurable elsewhere.

* Accountability for health plans to provide health care consumers more information about plans' quality and costs; doing so will include development of outcome measures to assess the quality of standard benefits and, possibly, of supplemental benefits.

* Antitrust reform to allow new organizational arrangements that promote efficiency and cost savings or avoidance.

* Insurance reform to avoid the extremes of cherry picking (in which an insurer limits coverage to the relatively young and healthy) and death spirals (in which a cherry-picking competitor's lower rates attract the low-risk enrollees of another insurer, leaving it with relatively high-risk enrollees). Insurance reform also is aimed at eliminating the exclusion of enrollees with preexisting conditions.

* Simplification of paperwork to speed up administration; this may include standardization of claim forms and more use of paperless "electronic forms."

* Tort reform to minimize the practice and costs of "defensive" medicine. Defensive medicine occurs, for example, when a doctor orders tests that are highly unlikely to aid patient diagnosis so that the doctor can forestall accusations of leaving an avenue unexplored. Such tests not only drive up costs but also may increase risk to a patient's well-being (for instance, they may cause allergic reactions). Many reformers want to alter malpractice law, while others only seek alternatives for dispute resolution.

President Clinton's plan is based on five major goals. At ASAE's May issue briefing, White House Aide Greg Lawler listed them:

* universal insurance coverage--that is, guaranteed private insurance that will never be taken away;

* consumer choice of insurance plan and doctor;

* preservation of Medicare (with choice of doctor);

* changes in insurance practices so that insurance can't be denied because you have a preexisting condition or taken away if you become sick; and

* benefits guaranteed in the workplace.

The last goal is the most controversial because it ties into the question of who will pay for insurance coverage and in what proportions. New taxes or requirement of individuals to shoulder all costs certainly would be unpopular with voters, as both the White House and legislators are well aware. Yet despite the unpopularity of taxes, various new ones--on payrolls, employer-provided health care benefits, and tobacco--are part of the Clinton plan and other proposed bills.

In any event, the White House realizes that changes are an inevitable part of public policy development and has expressed willingness to consider alternatives that support the five goals of the Clinton plan.

A half dozen other bills, each with supporters and detractors, have been submitted by:

* Representative Jim McDermott (D-WA)/Senator Paul Wellstone (D-MN);

* Representative Jim Cooper (D-TN)/Representative Fred Grandy (R-IA)/Senator John Breaux (D-LA);

* Senator John Chafee (R-RI)/Representative Bill Thomas (R-CA);

* Representative Bob Michel (R-IL)/Senator Trent Lott (R-MS);

* Senator Don Nickles (R-OK)/Representative Clifford Stearns (R-FL); and

* Senator Phil Gramm (R-TX).

Speaking at ASAE's second health care briefing, Senator Dave Durenberger (R-MN) said that he favored a bipartisan approach to health care reform. He introduced the Cooper/Grandy/Breaux bill and also supports the Chafee/Thomas bill. On the same day as the briefing, Senators Bob Kerrey (D-NB) and David L. Boren (D-OK) became the first Democratic sponsors of the Chafee/Thomas bill.

Less than a week later, Senator Edward M. Kennedy shifted away from part of the Clinton plan that, overall, he continued to support. Throughout the spring, the fortunes of particular bills and aspects of bills continued to rise and fall, with endorsements and criticisms not following strict party lines.

Meanwhile, five congressional committees have been working on major bill recommendations of their own. In the House of Representatives, three main reports were due from the Ways and Means Committee, the Energy and Commerce Committee, and the Education and Labor Committee. On the Senate side, two main reports were to come from the Finance Committee and the Labor and Human Resources Committee. What's more, six additional House committees and five Senate committees also offered recommendations.

As the committees' reports, the testimony and reports from public interest groups and other organizations and the commentary of the media were aired, the central question became how to pull the most useful and acceptable ideas together into one piece of legislation that could pass. The process is for one proposal each from the House and Senate to be debated and voted on. If both pass, House and Senate leaders meet to blend the two, and the Congress votes on the combined version. If that version passes, it is forwarded to the president for signature or veto.

Senator Durenberger says that virtually everyone in Congress agrees that they have to get a bill passed this year or expect to see health care reform evolve through a cumbersome, state-by-state process. Nonetheless, several of the points at issue may not be settled until late in the process or may cause a stalemate.

At issue

Reformers have a fundamental disagreement about whether there's a crisis in America's health care system. Those who believe that there is want swift, widespread change. Others believe that the reforms needed are narrower and should come in stages. The breadth of reform remains to be seen, but political realities indicate that the transition to reform will be gradual.

A question that arose early was whether insurance would be made available to everyone (universal access) or guaranteed for everyone (universal coverage). The debate on this topic cooled after President Clinton said he would veto any bill that didn't include universal coverage, but it may warm up again.

Another basic disagreement centers on the role of market forces: Some people believe that a relatively unfettered market will serve best, while others want more government controls. Dispute over the advisability and extent of subsidies and price controls is particularly intense. Because reform aims to streamline health care, proposals are subject to criticism if they seem to expand bureaucracy. And some policy analysts caution that, over time, cost-consciousness and control might cause America to drift from overcapacity in the provision of health care services to undercapacity.

Although, as mentioned earlier, establishing a core of standard benefits appeals to most reformers, they do not agree about its composition. In the deal making of the next few months, this issue probably will be settled somewhere between "catastrophic" and "cosmetic surgery" coverage. Insurance for benefits deemed supplemental will create market niches for optional insurance plans to fill--and opportunities for association plans.

A vital issue for association plans--and all employers--is the hotly contested question of who will pay for employees' insurance coverage. The original Clinton plan's employer mandate would require all employers to pay 80 percent of employees' coverage and employees to pay 20 percent. The actual premium for particular employees' plans could vary with their family status and selection or rejection of supplemental coverage. Low-income employees would be subsidized for all or part of their percentage.

In addition, the government would subsidize certain small and low-wage firms. How small is "small," though? Numbers of employees from 5,000 to fewer than 5 have been bandied about in various proposals related to a possible employer mandate and another issue that's discussed below: insurance purchasing groups.

Another aspect of the employer mandate question is whether and where to set a percentage of payroll ceiling or cap on premiums. The Clinton plan calls for certain small businesses whose employees have low wages to set premiums on a sliding scale of 7.9 to 3.5 percent of payroll. Senator Kennedy has spoken in favor of setting a cap of 2 percent in places that employ fewer than five people.

The general expectation is that the 80-20 split will not hold; instead, the employer proportion is likely to shift downward. But at press time, none of the proposals would affect union contracts that already require a higher employer percentage or future negotiation for a higher percentage. If a high employer mandate percentage is required, it will be hard for association insurance plans and smaller associations to live with.

The question of who will pay is complicated by a subset of questions, among them: Will employers maintain benefit deductibility? Will benefits become taxable for employees? How will part-time employees and self-employed people fit into the picture? What will the impact be on Medicaid, Medicare, and the Employee Retirement Income Security Act? Will financing arrangements prove adequate?

There's an outside chance that the government will act as a single payer, cast in the roles of underwriter and administrator. This nonmarket approach is the central theme of the McDermott/Wellstone bill. A single-payer approach would eliminate association plans.

Lobbying for this option stepped up in May when a campaign of television and print advertisements targeted key congressional districts to advocate the single-payer approach in opposition to large insurance companies, the Clinton plan, and the Cooper/Grandy/Breaux bill. Opponents of the single-payer approach are many, and it's unlikely to be the ultimate choice, but its supporters have too much influence to be counted out.

Besides, to achieve universal coverage, either a single-payer approach or some kind of individual mandate for people outside the employment system will be required.

Once details of an employer mandate appear in any proposed legislation, the question for those who offer, implement, or are served by an association insurance plan is whether participation in an association plan will fulfill the employer mandate's requirement.

Another issue for association plans relates to grouping for the purchase of health care coverage. The Clinton plan calls for state-based, regional health alliances. Each mandatory alliance would act as an insurance broker to purchase health coverage, certify health plans, manage premiums and enrollment, and provide consumer information.

Other proposals offer alternatives, some of which make grouping voluntary. The alternatives are called by an assortment of names, most of which include the word purchasing. The initialism HIPC (pronounced hip-ick) stands for "health insurance purchasing cooperative" and is increasingly applied to variations on the Clinton scheme.

Cooperatives are already written into state law and operating in nine states from Florida to California, with Texas soon to follow. If national legislation doesn't settle the matter this year, a dozen or more state legislatures will take it up in 1995.

Because organizations located near state borders often employ people from two or three states, their representatives have sought acceptance for groupings that are not state-based. Their case helps association plans because most of them aren't state-based either.

Some advocates of association plans see a pertinent analogy between their plans and Taft-Hartley plans, in which a union negotiates with employers for health care for, say, steamfitters. Those plans--grouped on an industry/occupational basis, as association plans are--are exempt from the Clinton plan's geographic grouping, but currently association plans are not.

As the May 16 issue of Fortune magazine pointed out, the Clinton plan "would force companies with fewer than 5,000 employees--99 percent of all companies--to buy through a single health alliance in each metropolitan region." But association plans can only continue if regional competition between or among public and private plans is allowed.

Such competition is allowed under California's current model. The state-run Health Insurance Plan of California (also shortened to HIPC) is doing well; employers with as few as three employees are eligible for the plan. But other small businesses have continued or begun to sign up for association plans that offer competitive prices.

Good pricing makes participation in many association group health insurance plans attractive. Associations have well established, efficient communication and distribution systems that drive down costs, giving association insurance plans a competitive advantage.

That advantage could be lost depending on the final decisions about community rating. Its flat rate eliminates price differentials for employers and individuals in an area. Under that rating method, association plans might get by or even do well by cutting costs and offering products and services well-tailored to members. But, experience rating (which goes into effect this month in California) is more favorable to association plans. In experience rating, premiums are based at least partly on the experience of a particular group in terms of the claims its constituent members have submitted.

What ASAE members can do

ASAE members have a part to play in making sure that association health insurance plans not only survive but also operate under provisions that allow them to compete and thrive.

If health care reform will have an impact on your association's insurance plan or your association as an employer, it's crucial to stay--or become--informed about the issues. And remember that if association plans continue, you may someday work where they add to your group's budget.

Now is the time to make your congressional representatives aware of the value of association plans and of the reform components that will ensure the healthy continuance of those plans. The New York Times, in its May 8 edition, put it bluntly about Congress: "Local concerns are taken seriously, for all the talk of serving as national legislators." So make your concerns known. And as long as health care reform continues to roll out state by state, don't neglect to make your point to state legislators as well.

The key is to demonstrate that association plans "add value." Explain what would not be done at all or as well without association plans. If your association has an insurance plan, thinking about added value will also help you to clarify how to structure and market it.

Jerry Connelly, senior vice president of the Alexandria, Virginia-based W. F. Morneau and Associates, has seen that the challenges to association plans have already caused many associations to review their plans and change for added value. He believes that, depending on what the new requirements are, association insurance plans may be allowed to do what they're good at with a more stable pool of people to insure.

Connelly recommends "looking in your own backyard" to review and explore the following:

* Expenses, both for insurance companies and administration. These need to lead to lower premiums than members could get on their own. If your plan hasn't comparison-shopped for vendors and services lately, give that a try.

* Product lines. Traditional indemnity products may be worth keeping, but also you might want to investigate newer managed care arrangements such as health maintenance organizations.

* Ways to market and service plans. Look especially at the advantages of working with other associations.

For an association plan to achieve post-legislation success, Montgomery K. Harris, director, John Hancock Life Insurance, advises that those who run it will need to

* offer more than one kind of plan;

* work with health maintenance organizations, physicians, and insurance carriers who are knowledgeable about working with small businesses;

* keep up with outcomes research; and

* find permissible ways of aggregating the number of members.

The need to boost numbers is a message also conveyed by Bruce A. Senft, vice president of the Pennsylvania Builders Association, Harrisburg. In his state, there's competition for association business in a handful of big cities but not in outlying areas.

The Clinton plan offers companies that employ more than 5,000 workers the option of running their own corporation alliances. Senft has found that for substantial leverage, a purchasing group needs to represent more than 5,000 people. So even if grouping requirements turn out to be low or voluntary, he advises making overtures to other associations.

The transition to new health care arrangements is under way, with a long, hot summer of health care reform debate likely to extend into fall. For ASAE, its members, and others who want to preserve association group health insurance plans, it is a challenging time.

HIGHLIGHTS

* PROPOSALS UNDER DISCUSSION may differ on implementation but generally agree on aspects of reform such as standardizing benefits and providing health care consumers with more information about plans' quality and costs.

* THROUGH TESTIMONY, issue briefings, and other actions, ASAE and The Association Healthcare Coalition are making the case for continuation of association group health insurance plans.

* A POSSIBLE STICKING point for association plans relates to grouping for the purchase of health coverage.

Joining Forces to Preserve Association Plans

ASAE is working with The Association Healthcare Coalition (TAHC), Washington, D.C. By May, more than 70 traditional trade and professional associations had signed on to help preserve association group health plans. Alliances of businesspeople or groups affiliated with insurance companies are not eligible for coalition membership.

Frank Duggan, an attorney with the Washington, D.C., firm Mullenholz, Brimsek & Belair, and former assistant secretary of labor, heads the coalition. Coalition representatives meet government officials to lobby for association insurance plan interests. From their experience, Duggan believes strongly that Congress will continue the programs that are working to deliver health care services effectively and fairly.

He anticipates that even if reform is sweeping, the changes will be phased in, Besides, whatever legislation passes, an extensive regulatory writing process will follow, giving associations another chance to preserve their plans at the Labor Department.

TAHC has been in touch with Representative James P. Moran (D-VA), who spoke at ASAE's May briefing. He characterizes health care reform legislation as the "largest unfunded mandate since the Social Security Act."

Whatever bill prevails, Representative Moran recently introduced a Concurrent Resolution expressing the sense of Congress to preserve association insurance plans that

* include 50 or more employers;

* are offered by associations that have been in existence five years or more and already offer an insurance plan;

* are genuine trade or professional associations (that is, do not exist solely to offer insurance); and

* do not manipulate their dues because of insurance matters.

He supports association plans because they meet special needs for small business coverage. And his vision includes expansion of public health and accident and illness prevention efforts.

To reach TAHC, call [phone]; or fax to [phone].

The Healthcare Forum Study: Public Perspectives

The Healthcare Forum--a nonpartisan organization involved in research and education about new leadership thinking, organizational learning, and mastering change--released What Creates Health? Individuals and Communities Respond in April.

This booklet reports results of a national study to learn what the American public considers critical to their health. DYG, Inc., the social research firm rounded by Daniel Yankelovich, conducted the study.

From the Healthcare Forum's San Francisco headquarters, President and Chief Executive Officer Kathryn E. Johnson, CAE, answered questions about the study's main findings and their implications.

What key findings emerged from the study?

Johnson: Our study uncovered several key findings, including a demand for a new style of national and community leadership; a lack of confidence in current leadership institutions; a new conception of what creates health and healthier communities; a growing caution about health care reform; and a public willingness to play a more active role in community health.

How cautious are people about health care reform?

Johnson: As debate heats up, Americans are beginning to get cold feet about how bold reform should be, although the majority believe changes are needed. Of the people we polled, 69 percent supported guaranteed health insurance for everyone but believed that "we should move to it step by step to make sure that we can afford it."

What are your study's implications for national, community, and health care leaders?

Johnson: Americans seek a new leadership model--one in which leaders themselves work collaboratively, not competitively, and approach problems across issues and areas of responsibility. Of the people who were surveyed, nearly 6 in 10 cited lack of cooperation among community sectors as a major obstacle to building healthier communities. Nearly 2 of 3 cited lack of leadership accountability as the major hindrance.

And Americans want a form of leadership that will engage the public. People place more confidence in themselves than in institutions; they see themselves as an underutilized resource. They want and need community-based education and information to equip them to play a role in making their communities healthier. Individuals believe that they can control their own health to an extent through lifestyle changes and such strategies as check-ups, immunizations, and diagnostic screenings.

What else came to light about public perspectives on health and quality of life?

Johnson: Americans are moving away from the idea of health as the absence of disease and the result of medical intervention. They're coming to a broader definition that encompasses personal responsibility and quality of life. The public wants leaders to develop strategies that take these factors into account.

Among the quality-of-life factors that the public considered critical to a healthy community were family-centered issues--from avoiding child abuse to caring for elderly relatives--safety, and a clean environment.

Nearly 75 percent believe that the real problem with communities today is moral decline. And 50 percent see "everyone looking out for themselves" as a barrier to healthier communities.

So people are generally discouraged about the health of their own communities and confused about the extent to which they should or must sacrifice individual rights for the greater good of their communities. This tension between individual and community needs is recognized as important, but Americans have not reached a consistent judgment about how to resolve the issue. Slightly more than 50 percent of the people we surveyed believe that "substantial" sacrifices will be necessary to get the country back on track.

Diane E. Kirrane is a Washington, D.C.-based policy consultant and business writer.

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