(FORTUNE Small Business) – How can you tell a cashier at Sears from a cashier at Pop's Bagels? Just look at their teeth. Odds are, the Pop's employee has no dental plan. Odds are, in fact, the Pop's cashier has no health plan at all and is either skimping on basic medical needs or going broke trying to stay fit. Sound familiar? Indeed, some 44 million Americans are without health insurance, and 60% of them work at businesses employing fewer than 500 people or are family members of those who do. Most are at shops employing fewer than 25, where the high cost of insurance often forces owners to choose between health benefits and decent pay raises.

Small business owners aren't happy. They lose good workers every year to larger firms with better health plans, and this predicament has been their No. 1 concern in polls every year since 1986, according to the National Federation of Independent Business (NFIB). At long last, the issue is coming into focus in Congress and has also surfaced in the presidential race.

Here's the crux of the matter: While the cost of health care has risen about 10% a year recently, the cost to small businesses has risen at about twice that rate. Many owners stop offering coverage or push costs onto employees, who then opt out. Basically, big companies with thousands of employees get better rates because the underwriter's risks are spread out. One catastrophic illness is easily absorbed. But one big-ticket illness in a pool of ten or 20 people can make premiums unaffordable.

Big firms also operate under federal Employee Retirement Income Security Act (ERISA) guidelines, which supersede varying and often baffling state insurance requirements. This lets national employers use one set of rules, simplifying the administration of health benefits. Moreover, ERISA guidelines in many cases are far less costly to implement than the state requirements, which may include coverage for such things as mental illness and alcoholism treatment, contraceptives, dentures, and hair replacement.

Although well-intentioned, the state mandates drive up costs. And in many states, one or two insurance providers enjoy near monopolies, leaving small business owners few alternatives. In March, the American Medical Association and the Pennsylvania Medical Society asked the Justice Department to investigate two Blue Cross/Blue Shield plans for anticompetitive practices in Pennsylvania, where they have about 70% of the market. "The small business owner wants an option," says NFIB lobbyist John Emling.

Republican presidential candidate George W. Bush favors association health plans, or AHPs, which would give small businesses many of the advantages large firms enjoy by letting them band together through trade groups to offer health insurance under ERISA. Vice President Al Gore and other Dems oppose that measure, fearing it would undermine state-mandated coverage and hurt existing intrastate insurance pools offered by labor unions and others. Gore's response is to encourage more purchasing coalitions such as those already in place to spread out risk. He'd also reward small business owners with tax credits for providing health plans.

Because the Democrats aren't on board, AHPs probably won't be part of any bill this year. Relief is coming, though. Both sides want tax credits and will speed full deductibility of health-care expenses for small businesses (now scheduled for 2003). Extending a pilot program for medical savings accounts looks certain. MSAs allow small business employees to set aside pretax dollars for medical care. Any relief along those lines would be welcome. But tax credits and deductions don't go far enough. Small companies need the same clout as large ones. Only through AHPs will they get bargaining power and be able to drive down costs at the root--the amount they pay insurance providers. Now that's a solution.