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Jim Talent's idea for getting people insured.


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Ramesh Ponnuru

The number of Americans without health insurance jumped last year by almost 6 percent, to 43.6 million. About half of these people go without insurance for short periods; another half lack insurance year-round. It’s no surprise that the un-insurance rate has risen. One consequence of an employment-based health-insurance system is that when people lose their jobs, they lose their insurance too.

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Senator Jim Talent, a Republican from Missouri, thinks he can put a dent in the problem. When he was in the House, he championed a measure to let small businesses pool together to offer health insurance to their workers. It passed the House with bipartisan support, but stalled in the Senate. Talent’s first speech in the Senate, to which he was elected last year, was devoted to breaking the logjam.

Talent says that his “association health care” bill is the only free-market measure to increase access to health insurance that stands a chance of passage in this Congress. The idea is simple. Federal law lets large employers get health insurance for their workers without having to comply with state regulatory mandates. So if Nevada has decided that all insurance plans have to cover chiropractors’ visits and hair transplants, big businesses can still provide different packages of health benefits. Talent’s bill would let small-business trade associations offer insurance for their members on the same basis. That’s why it’s officially titled the “Small Business Health Fairness Act.”

Talent’s bill is supported by conservatives such as Rep. Ernie Fletcher, moderates such as Senators John McCain and Olympia Snowe, and liberals such as Rep. Nydia Velazquez. It is also supported by President Bush. Its most enthusiastic supporters, however, are in the small-business lobby. “This is the number one concrete problem confronting small business today and therefore entrepreneurship in general,” says Talent. Small businesses lose employees because they can’t offer decent insurance coverage. The bill is a top priority for the National Federation of Independent Business.

The bill is opposed by Blue Cross/Blue Shield, which fears it would lose its strong position in the small-business market. (At one point, Blue Cross even ran a sweepstakes offering people who wrote form letters opposing the bill the chance to win $300 and a free trip for four to Washington, D.C.) The National Association of Insurance Commissioners is against the bill, since state insurance regulators would lose business, too. The National Governors Association and the National Association of Attorneys General is also opposed, since they are duty bound to oppose all things right and good. Ted Kennedy has threatened a filibuster.

A bigger problem for the bill may be the Congressional Budget Office, which concluded a few years ago that association health plans would not do much to increase the number of people who have health insurance. The reasoning was that since AHPs would not have to abide by state mandates, they would offer only stripped-down health coverage. The insurance would therefore not be attractive enough for many people to sign up. It’s a miracle, under this reasoning, that anybody who works for a large company gets health insurance. They are, after all, exempt from the mandates too.

A related argument is that AHPs will engage in “cherry picking,” providing insurance only to companies and employees who are healthy. The cherry picking argument depends on the same premise as the CBO’s report, and there are also legal safeguards to prevent it. (The fact that cherry picking keeps coming up as an issue in insurance regulation is a sign of that regulation’s essential foolishness, but that’s a long issue for another day.)

Leaving these issues aside, should conservatives be for Talent’s bill? Does it violate federalist principles? Senator Talent acknowledges that the federal government’s power to regulate commerce among the states has been abused to justify all manner of improper federal intervention. But, he says, “This is legitimately interstate commerce–people wanting to cross state lines to buy insurance together.” State regulations are imposing barriers to that commerce, and the Constitution gives the federal government the power to tear such barriers down.

If the bill is successful, however, senators such as Talent will have to be vigilant. The interest groups that got all those mandates imposed in Harrisburg and Topeka will surely move to Washington.

The conservative think tanks are for AHPs. Senator Talent, however, detects a certain lack of enthusiasm. The think tankers’ hearts are with medical savings accounts, which hold the promise of changing the health-care system more substantially. (MSAs would alter the tax rules to change the current system’s bias toward using insurance as a way of prepaying medical bills. Over time, the result might be a system in which people paid out-of-pocket for routine medical expenses and got insured against catastrophes.) Talent is for MSAs himself, but thinks his bill can get enacted more quickly. Most free-market reformers, he says, “want to move to some other world. This bill tries to make the existing world work better.”

Conservative education reformers didn’t think that charter schools were a substitute for vouchers, either, but they did champion them as a useful deregulation of the existing system. They should support AHPs on the same basis.

Talent says he’s a little surprised by the opposition of Senate Democrats. “There is nothing in this bill that implicates any of the great philosophical divisions that separate the two parties on other kinds of issues.” He adds, “Let’s suppose it doesn’t work. It doesn’t provide better insurance. People won’t join it. What have we lost? There is no downside to this bill unless you have a vested interest in this dysfunctional system. Then you’re opposing it not because you think it will fail but because you think it will work.”



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