Who’s Afraid of a Little Competition?

July 4, 2005

Ah, the traditional signs of summer-salt air, suntan lotion and that pungent smell without which no vacation trip is complete-the fumes of expensive gasoline. Although skyrocketing gas prices consume much of the nation’s news coverage, it is a challenge that can be controlled by the most-proven tenet of free-market economics: competition-customers shopping around for the lowest price.

Imagine how quickly America’s healthcare crisis could be solved if competition were allowed there. Instead, powerful insurance monopolies are determined to fight competition and keep their profit margins high at the expense of millions of small businesses that today are subject to 50 different state regulations governing health insurance.

According to the General Accounting Office, five or fewer insurers control at least three-quarters of the small-group insurance market. This lack of competition contributes to double-digit premium increases for many small businesses and forces an increase in the number of their employees who are uninsured.

Currently, 27 million working Americans are uninsured; 63 percent of those are either self-employed or work for a small business with less than 100 employees. The crippling burden of having to deal with state insurance regulations and the sky-high premiums they create is a problem in search of a solution. That solution is the enactment of a federal law to allow the creation of small-business health plans.

Three decades ago, Congress passed the Employee Income Security Act that pre-empted state insurance regulations for corporations and labor union organizations. The move allowed these large entities to self-insure under one uniform federal statute, thus taking advantage of group purchasing, volume discounts and administrative efficiencies.

One of the great mysteries of Capitol Hill is how a sector of the economy that represents 99.7 percent of all employers provides jobs for half of the private-sector workforce and generates 60 percent to 80 percent of net-new American jobs each year got overlooked to begin with. But it is long past time to undo that mistake.

The temptation for lawmakers to flee the nation’s capital as warmer weather approaches is always strong, but the National Federation of Independent Business has called on its 600,000 small-business members to turn up the heat in Washington, D.C., to demand that Congress finally bring fairness and competition to the health insurance market by enacting the Small Business Health Fairness Act of 2005.

Twice-approved by the House of Representatives during the last Congress (the Senate did not act), the measure would open the way to fair, competitive health insurance for small firms by letting them band together across state lines to buy insurance through their bona fide trade associations. By making insurance more affordable, more small firms will provide it to their employees and families. Research indicates that as many as 8.5 million previously uninsured workers could get coverage if the act is passed.

Who’s afraid of a little competition? That’s a question members of Congress should ask those few insurance monopolies with the big profit margins.

Jack Faris is the president and chief executive officer
of the National Federation of Independent Business,

based in Washington, D.C., and located on the Web at
www.nfib.com.

Topics Legislation

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