Groups Prepare for Insurance Hit

Posted November 3, 2009 at 6:35pm

These are fretful days for Stan Schuck. Like countless nonprofit business leaders nationwide, the president of the Philadelphia-area Main Line Chamber of Commerce is busy soothing a membership reeling from historically high unemployment and foreclosure rates, the prospect of higher taxes and less revenue in a prolonged down economy.

Schuck, too, might soon be singing the blues. As Congressional leaders and the White House finalize an overhaul to the domestic health care system this month, Schuck and other trade association executives are worried about how Democratic-proposed changes may eviscerate a major moneymaker for their organizations: the sale of health insurance plans.

“If they go to a public option or a co-op, those will go away,— Schuck said of his organization’s health insurance offerings. “We’re preparing for that. We’re looking for other revenue sources.—

According to interviews and a Roll Call analysis of tax records, some of the business community’s most vocal opponents to Democratic health care legislation also appear to have a substantial stake in the health insurance system. National groups such as the National Federation of Independent Business, Associated Builders and Contractors Inc., and U.S. Chamber of Commerce affiliates offer health insurance plans to their members, with some groups raking in substantial profits from the sale of policies. Exactly how much trade associations stand to lose overall from current proposals is unknown, as groups were understandably reluctant to discuss their own financial interests.

Internal Revenue Service disclosure requirements and the fragmented, state-regulated health insurance business also make it difficult to discern trade associations’ overall exposure to the market disruptions, but it may be dramatic.

While the overall impact to trade groups is opaque, the effects look grim for Schuck’s group, one of 283 “accredited— Chamber of Commerce affiliates across the country.

The Main Line Chamber of Commerce had $1.1 million in revenue in 2007, according to its most recent tax filing available at GuideStar.org. Of that total, almost $500,000 came from membership dues and investments, while $652,759 was raised from publications, seminars and other “program service revenue,— according to its IRS tax filing.

Of that total, the Main Line Chamber of Commerce made about 30 percent of its overall revenue, $326,875, from the sale of insurance. According to the organization’s Web site, the chamber affiliate offers medical, dental and vision benefits through the Philadelphia-based administrator USI Affinity.

“For competitive rates, high-quality customer service and an all out advocate for our members, employees and staff, you owe it to yourself to check out USI Affinity,— reads an endorsement bearing Schuck’s name on USI Affinity’s Web site.

Schuck also says his organization offers a prescription drug card that nets a 1 percent return on purchases by its members. Perhaps offering a rare glimpse into the complicated finances of many business groups, Schuck also explained how many local chambers of commerce have even more substantial insurance businesses.

“Some chambers are actually brokers — they broker to their members, they maintain the staff,— he said. “Other chambers act as marketers. They work with a broker who offers a really good package to their members and get the benefits of being involved in a larger group.—

If current Democratic proposals make it to President Barack Obama’s desk, Schuck is not expected to be alone among business group leaders who will be scrambling to fill holes on their balance sheets.

According to tax records, the Montana Chamber of Commerce made roughly 10 percent of its revenue from the sale of health insurance in 2007. The group, which lists its health insurance offerings on its Web site, raised $814,694, $82,092 of which came from a “member health plan,— according to tax documents available on GuideStar.org.

Montana chamber President Webb Brown said a loss of insurance revenue is “one of the reasons the public option is a concern for us.—

“We’re all about competition and offering some alternatives that some people haven’t had before, but if the weight and force of government to negotiate different rates with doctors, medical providers and others, that could put us at a disadvantage,— Brown said.

Brown’s group is part of the U.S. Chamber of Commerce’s Committee of 100 Members, according to the national chamber’s Web site.

Other prominent trade groups that oppose Democratic plans also appear to hold substantial stakes in the health insurance market. For example, the NFIB offers a health insurance plan to its Montana residents on its Web site, which states that it is offering “a new health insurance program with several plan options and an overall premium savings of 7 percent or more.—

An NFIB spokeswoman declined to discuss how much money the group or its affiliates make from the sale of health insurance, but a Roll Call analysis of the Nashville, Tenn.-based group’s tax filing suggests it could be substantial. According to its 2007 tax filing, the NFIB had $1.7 million in revenue from “royalty income,— proceeds that likely result from the sale of insurance, as well as other sponsored programs.

This week, a coalition including the NFIB, the U.S. Chamber of Commerce and Associated Builders and Contractors launched a cable television advertising campaign in 19 states opposing Democratic-sponsored health legislation.

“The House health care proposal could wipe out even more jobs, raise costs, and put employers’ and employees’ current health care benefits at risk,— coalition members wrote in a statement on Monday.

U.S. Chamber of Commerce spokesman J.P. Fielder declined to discuss his group’s direct or indirect stake in health insurance sales.

“We’re involved in this from a policy perspective,— Fielder said. “The No. 1 thing out of this place is driving down the cost of health care, bending the cost curve.—

The Associated Builders and Contractors also appears to run a brisk health insurance business. On its Web site, the group offers ABC Merit Choice Through the ABC Insurance Trust, a health insurance program “that takes advantage of ABC’s collective member buying power.—

According to the group’s 2007 tax return, it made $550,000 combined from royalties, insurance fees and “affinity/business partner income.—

The organization’s communications office did not respond to a request for comment on Tuesday.

Health care industry consultant Larry Lewin said a public health care option is not the only threat to the loose patchwork of health care plans now offered by trade associations across the country. Lewin said competition spawned by proposed state-based exchanges is the “real threat— to insurance plans offered by U.S. Chamber of Commerce affiliates and other business groups.

“The insurance companies are going to have to compete more aggressively,— Lewin said. “Because of the exchange, this business — these aggregating functions — may no longer be valuable.—

“All that [trade associations] are really doing is steering people to the insurance companies and getting a brokerage fee for it while not doing much in the way of brokerage functions,— he added. “They’re not advising. They’re just making it available.—

A trade association executive who requested anonymity because of the sensitive nature of the ongoing health care debate agreed that proposals establishing state-based insurance exchanges would offer most nationwide trade groups little consolation.

“There’s no way I can run 50 plans. I can run one,— the executive said. “And it would only make sense if I could offer my people something that was better than they could get in an exchange or in the general marketplace.—

Still, the executive said a handful of health insurance plans offered by trade associations in large metropolitan areas could ultimately survive Democratic-proposed overhauls. The adoption of health maintenance organizations and other concentrated health care pools in recent decades, the source said, makes it difficult for national trade associations to bundle risk across state lines.

“There was a time 15 or 20 years ago when there were a fair amount of national association health plans — that number is far, far smaller today because of the nature of HMO and [preferred provider organization] markets, which are very localized,— the source said. “You can’t find a health insurance carrier that can give you a nationwide lift anymore.—