Last May, Renee Kerckhoff officially became part of the national debate on health care.

Kerckhoff is the second-generation owner of Rudroff Heating & Air Conditioning in Belton, Mo. The company is like many small heating and air-conditioning businesses across the country: It has been family owned since 1959, has six employees, specializes in residential retrofit work, and is unable to cover the full cost of health insurance for employees.

On May 9, Sen. Jim Talent (R-Mo.) mentioned Kerckhoff as the U.S. Senate debated legislation that would have allowed small-business owners like Kerckhoff to join across state lines to maximize their health insurance purchasing power.

If the legislation becomes law, Kerckhoff and other members of trade groups, such as the Air Conditioning Contractors of America, and Plumbing-Heating-Cooling Contractors National Association, might be able to buy insurance together at a lower rate. Instead of trying to negotiate with insurance companies just for her six employees, such a so-called "association health plan" would allow small businesses to form larger pools of workers to secure a better deal.

Large corporations, with hundreds or thousands of workers, have used such arrangements to lower their health premiums for years. Current law does not give smaller employers that option.

The legislation, which has been introduced in Congress several times in recent years, has the support of many industry associations beyond heating and air conditioning. But all bills so far have failed to get the votes needed to pass both chambers.

While the PHCC and the ACCA urged its members to contact their lawmakers to support the bills, the insurance industry and other powerful lobbying groups like the American Cancer Society and AARP, formerly the American Association of Retired Persons, were mounting a fight against it.

Why would groups that have advocated for expanded health care for years oppose a bill that might help small-business owners provide more affordable coverage for employees?

Buying power

According to Kerckhoff, joining an association health plan would eliminate one of her biggest concerns as a small-business owner. Kerckhoff's insurance premiums are so high she can only afford to pay approximately $150 per employee each month. The rest, up to $500 a month, must be paid by employees.

In one year, she says she saw her health insurance costs go up 70 percent. And many of her employees decided to drop their insurance because they were unable to afford it.

Kerckhoff said one worker, a man in his mid-50s, did exactly that because "his health insurance costs were going to be $500 a month."

With his wages at $15 an hour, he couldn't afford the insurance that Kerckhoff could provide. Unfortunately, his wife had a stroke and the family could not pay for the medical bills, forcing them to seek welfare.

"I know a lot of contractors who can't insure (their employees) at all," said Kerckhoff. "You can't afford to have anyone sick. I'm forever shopping for new health care."

Many new insurance plans come in with a low rate, and in a year, the costs go up, she said.

Kerckhoff started writing letters to Washington, participated in her local chamber of commerce, and joined political e-mail lists on the issue. Eventually, Missouri Sen. Talent heard Kerckhoff's story and used it as one example why Congress needs an association health plan bill.

Association health plan legislation has been around, in one form or another, since 1995. The bills have easily passed in the House of Representatives, but always stall when they reach the Senate. Most recently, the House approved a small-business health bill in July 2005. The Senate version, introduced by Sen. Mike Enzi (R-Wyo.) last May, garnered wide support from HVAC trade associations, including the ACCA.

Charlie McCrudden, director of government relations for the ACCA, said that many members, who are mostly small-business owners, have seen 25 percent annual increases in their health insurance costs. McCrudden said such businesses, which employ only a handful of workers, have trouble negotiating prices with insurance companies.

"Small businesses don't have the buying power of, say, Ford or GM," he said.

Large companies with hundreds of employees are able to negotiate better rates with the insurance companies because they have more workers buying in to the plan. For small businesses, "the risk pool is too small," McCrudden said.

But under an association health plan, small contracting companies would get the same benefits as a Fortune 500 company, at least according to McCrudden. For example, members of the ACCA would be allowed to buy into one insurance plan for all ACCA members. The idea is that this would cut costs because the insurance would be bought for thousands of ACCA members, not just the six employees at Rudroff Heating & Air Conditioning.

Charles Rauch, owner of Valley Heating and Air Conditioning in McMurray, Pa., said insurance companies refuse to give small-business owners a break.

"It's definitely unfair that insurance companies treat us differently than a company with 200 employees," he said. "They are willing to negotiate with larger companies."

Valley Heating and Air Conditioning is a residential and light-commercial service company in the south suburbs of Pittsburgh. Rauch said his insurance costs went up 20 percent in one year, and that was considered "low." Another year, his health insurance saw a 39 percent increase.

Valley Heating and Air Conditioning used to give employees full coverage with no deductibles. Now, employees have a $500 annual deductible.

"I try to ease as much of this as I can," said Rauch. "I have to cover costs and increase my labor rate to offset the price of it."

Jeff Miller of Al-Don Services in St. Louis has also been forced to raise prices due to the cost of health insurance.

"We can't raise our prices fast enough to keep up," he said.

Miller's mother, Jane Miller, is the owner of Al-Don Services and started the business more than 50 years ago. According to Miller, the company is one of the oldest HVAC businesses in the St. Louis area, and it chooses to be a small business.

"In the early 90s, health care for employees was very reasonable," said Miller. But health insurance rates have gone up every year at Al-Don Services. In the past five years, the company has seen rates go up each year by as much as 21 percent. Employee deductibles are now at $1,000. Previously, employees had no deductible on health coverage.

"Business owners want to take care of their workers and they can't afford it," said Miller.


Miller said he believes insurance companies played the biggest role in stopping the legislation. He said that association health plans would make insurance more competitive, something he believes the insurance companies don't want to see.

McCrudden doesn't think Miller is far off. In an e-mail to ACCA members, McCrudden said that insurance companies and state regulators are opposed to association health plans because it would cause insurance companies to lower premiums and regulators would lose control over their state's health care systems.

"Insurance companies are against it," McCrudden said. "They don't want government telling them what they can do."

But insurance companies and state regulators aren't the bills' only opposition. The American Diabetes Association, the American Cancer Society and the AARP are among the groups that aggressively worked to stop the bills from becoming law.

They feared it could overrule state coverage requirements and would lead employers to only hire younger, healthier workers.

"AARP opposed (the bill) because it put older workers at risk, pre-empted important state regulations and would have eliminated state-mandated coverage for important benefits like cancer screenings," said Bill Novelli, chief executive officer of the AARP.

Andy Fish, director of government relations for the American Cancer Society, said there are state laws requiring insurance companies to cover certain preventative cancer tests. For example, mammography coverage is required by 49 states, while colorectal cancer screenings are covered in 19 states. There are also many states requiring insurance companies to pay for clinical trials for cancer patients or off-label drugs.

The bill Sen. Enzi sponsored would have pre-empted these state laws by setting up federal rules, Fish said.

He also said the American Cancer Society had concerns about the legislation when it passed in the House of Representatives in 2005.

"When the bill came out of (Senate) committee without changes, we became even more vocal," said Fish. "There was no doubt that this issue touched a real nerve with our supporters."

According to Fish, it was the cancer society's largest grassroots lobbying effort to date.

There were also concerns that the plan could alienate older workers.

"State regulations try to keep everyone in one pool," said Fish. "The federal system relaxes state legislation. The trade-off is healthier workers get better plans."

The most recent bill would have allowed companies to buy a cheaper insurance plan that would not cover important medical procedures for older workers, Fish said. A cheaper policy could make it "more likely that employees will be moved into a policy with less benefits and poorer coverage," he added.

The American Cancer Society and the AARP both say they support easing the cost of health care for workers, but the bill sponsored by Enzi was bad legislation.

Novelli said the AARP would like to work with members of Congress to develop bipartisan legislation that would lead to more affordable health care coverage.

The American Cancer Society was supportive of another health plan bill sponsored by Senate Democrats. Sponsored by Sens. Richard Durbin of Illinois and Blanch Lincoln of Arkansas, the alternative bill would have provided the same health benefits that members of Congress and federal employees receive. The American Cancer Society also claims that the competing legislation would have kept state-enacted coverage mandates intact.

The Democrat-sponsored bill has not come up for a vote in the Republican-controlled Senate.

What's next?

Association health plans remain one of the ACCA's legislative priorities, McCrudden said. Even though the Senate bill was not voted on, it was a major accomplishment that the bill was formally debated, he said.

McCrudden added that there is a "flicker of hope" that a bipartisan group of senators could bring the issue back before Congress adjourns this month.

He also said that Sen. Olympia Snowe (R-Maine) has offered an amendment that if a medical procedure were covered by insurance in at least 26 states, then it would need to be covered in all states under the bill. McCrudden said he believes that if this amendment is added to any new bill, it may be enough to get it passed.

"No bill is perfect," he said. "You pass what you can and then go from there."

McCrudden added that he believes employers will make sure that their workers have the coverage they need.

"I don't think AHPs will harm consumers," he said. "Employees are not going to accept plans they don't like."

The cancer society's Fish agreed.

"Over time, insurance companies will do what makes sense for them in the market," he said, and that includes offering the insurance plans employees want.

But for small-business people like Renee Kerckhoff and Jeff Miller, it's not an issue of what they want for their employees. It's what they can afford.

For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail