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WASHINGTON-All Rep. Harris Fawell, R-Ill., wants to do is level the health insurance playing field for small businesses.

Critics-namely consumer groups, health insurers and state insurance regulators-say he's going to bulldoze it.

The thrust of Rep. Fawell's bill would be to allow groups of related small companies to set up insured and self-insured multiple employer welfare arrangements, which are generally exempt from state regulation under the Employee Retirement Income Security Act. That would offer small companies the same protections from state regulation enjoyed by larger employers that can afford to self-insure their health care risks.

That would save money for smaller companies by allowing them to escape expensive state-mandated benefits.

"We're asking for precisely what big companies have," said Rep. Fawell, chairman of the House Subcommittee on Employer-Employee Relations, which has jurisdiction over employee benefit plans.

As one of the business community's top priorities, it's shaping up to be one of this year's biggest federal health policy battles, too.

"We're going to oppose strongly a number of (the bill's) components," said Don Peterson, chairman and chief executive officer of Lake Forest, Ill.-based Trustmark Insurance Co., who is also incoming chairman of the Washington-based Health Insurance Assn. of America.

Rep. Fawell's proposal was stripped from health care reform legislation passed by Congress last year (BI, June 17, 1996).

Rep. Fawell last week attached the measure to the must-pass budget-reconciliation bill pending in the House.

With 140 co-sponsors in the House and support from Senate Majority Leader Trent Lott of Mississippi, the Fawell bill is on a fast track through Congress, but a similar House-passed bill ran into strong White House opposition last year.

The issue goes to the heart of the country's health care problem-the unaffordability of health insurance for many small companies and individuals.

Republicans want to increase coverage by private business rather than resorting to the kind of guaranteed, federally administered coverage that the Clinton administration proposed in 1993.

Rep. Fawell changed last year's version of the bill to address criticism that there was little to prevent such small business group plans from going bust. The new bill would require plans to set aside reserves and buy termination insurance in case a plan folds.

Critics "don't have any arguments left, so they bring up the old ones that aren't accurate anymore," said Alan Mertz, Rep. Fawell's chief of staff.

Republicans aren't in any mood to listen to White House objections this time around. "They don't want to solve the problem" of the uninsured, said Scott Palmer, chief of staff for Deputy Majority Whip Dennis Hastert, R-Ill., the GOP leadership's point man on health policy issues. "They want to keep the problem so they can get a federal takeover" of the health insurance industry, he charged.

But health insurers question whether Rep. Fawell's proposal would reduce costs in the short run while driving them up over the long run.

The fear is that the existing insurance market would be fragmented as the companies most able to achieve lower health care costs-such as an association of high-tech companies with lots of young employees-would be the first to band together and form their own MEWA, leaving the rest of the small-business insurance pool with relatively higher-cost members.

"Instead of helping small businesses, this will completely undermine the insurance market for small business," said Christina Nyquist, Washington-based director of health policy for the Blue Cross & Blue Shield Assn., which is leading the insurance industry opposition.

The Fawell bill would allow trade associations or groups of small employers to obtain health insurance collectively through the MEWA, giving them the kind of purchasing power and administrative savings that make health care costs as much as 30% lower for large companies.

To some extent, employer groups can already do that, depending on the law in individual states. But the bill would foster the practice by making it clear that such group arrangements would be covered by ERISA's pre-emption of state laws pertaining to benefits.

"It's clearly a step in the right direction," says Larry Boress, vp of the Midwest Business Group on Health. "We know there's power in numbers."