The proposal, which passed the House on May 13 and is pending in the Senate, would allow small companies to form "association health plans" that would be regulated by federal rather than state officials. The plan, sponsored by GOP Sen. Jim Talent of Missouri, is designed to reverse a trend that shows most uninsured workers in the country are employed by small companies.

Most small-business owners don't offer health insurance and cite costs as the top reason, according to a survey last year by the 600,000-member National Federation of Independent Business.

"You absolutely have to address the small business if you want to solve the problems of the uninsured," said Sen. Blanche Lincoln, D-Ark.

She and Sen. Richard Durbin, D-Ill., are sponsoring a separate bill that would direct the federal government to administer a separate health coverage plan for small businesses that employ fewer than 100 workers. Employers would get a tax credit for workers whose salary is less than $25,000 annually.

Supporters of Talent's legislation say state regulation has been a burden for small businesses that can afford health insurance for their workers. Opponents counter that association health plans would prompt insurance companies to cherry-pick companies with the healthiest workers. Other businesses would be consigned to state insurance pools, which would drive their health costs even higher.

They also say the federal government does not have the personnel or expertise to regulate insurance products, and lack of effective oversight would increase fraud.

The association health plans bill has won key support from influential Sen. Robert Byrd of West Virginia, the only Democrat backing the proposal in the Senate. The bill's key provisions would:

• Allow businesses to team up across state lines to form larger insurance pools that would have buying clout to negotiate lower insurance rates.

• Give the Labor Department oversight over the association health plans.

• Exempt the plans from state-mandated health benefits.

The issue also reaches to the presidential campaign trail.

Bush administration officials support the proposed association health plans. But Sen. John Kerry of Massachusetts, the likely Democratic nominee, opposes the idea, saying it makes more sense to let small businesses buy into the same health plan that insures federal workers