The Department of Labor on Thursday (1/4/2018) released proposed new rules that its backers, including President Trump, say will make it easier for small businesses and sole proprietors to band together in Association Health Plans (AHP) to purchase health insurance. If approved, these rules, a follow-up to an executive order from President Trump issued last October, will allow new forms of associations to be created that supporters say will make healthcare insurance more accessible for small businesses and sole proprietors, likely starting in 2019. The proposal — which now faces a 60-day comment period — broadens the definition of those eligible to join or form such groups. Supporters say that AHPs are similar to large group plans available to major corporations. Association Health Plans have long been supported by organizations like the National Restaurant Association, National Retail Federation and NFIB. They have been opposed by traditional types of insurance companies including state-based Blue Cross associations and members of the insurance trade group AHIP.
AHP supporters say they will make insurance more affordable and available to small businesses and the self-employed. Here are some reasons why.
The plans will use the same type of purchasing leverage as corporate “large-group plans” | Even before Obamacare (also called the ACA or Affordable Care Act), large employers were able to “self-insure” and thus be exempt from certain state-by-state mandated benefits related to hospitalization, prescription drugs and emergency care. Association Health Plans, because they will be treated as “large group plans,” would also be able to benefit from the same purchasing power and flexibility in coverage of self-insured options. Also, large group plans typically purchase catastrophic coverage at prices not available to small groups or individuals.
Prior conditions | The plans could not reject employers based on the health status of their workers.
Individual pricing | Individual employees in a workplace could not be charged different amounts based on their health.
State authority still applies | States historically have had oversight responsibility for insurance coverage sold in their state. In the rule, no matter how plans are funded, states would still retain oversight of their solvency in the way they regulate self-insured large businesses that operate in their state.
Here are some reasons its critics give for opposing AHPs.
Critics say the rules could expose consumers to coverage gaps or higher out-of-pocket costs and would not have to meet some ACA rules
Plans would not have to include all ACA requirements | According to opponents, associations would not have to include benefits across 10 broad “essential” categories of care, including hospitalization, prescription drugs, and emergency care. However, as noted above, large group plans do not have to include these under Obamacare.
Overhead mandate exemption | Opponents argue associations would be exempt from an ACA rule requiring insurers to spend at least 80 percent of premium revenue on medical care.
State authority | Association plans would be able to offer plans across state lines. For this reason, states and state-based insurance groups like Blue Cross / Blue Shield have historically opposed Association Health Plans.
Cherry picking the young and healthy away from individual insurance pools | In a statement, the industry advocacy group AHIP says that allowing AHPs could pull the young and healthy away from the broader individual insurance pool. That could, in turn, raise the cost of insurance for those insured through the federal marketplace, for example.
Overview: Key elements of the rule
Purpose of the rule from the Department of Labor | A follow-up to an October executive order from the Trump Whitehouse that small business trade groups say will enable small businesses and sole proprietors to access affordable healthcare coverage by forming large group associations.
If approved, the rules will allow associations to be formed for the purpose of offering insurance and enrolling members from the same industry or region | “A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide,” said the Department of Labor’s press release on the proposed rule.
Many small business advocacy organizations have pushed for AHPs for years | Organizations like NFIB, the National Restaurant Association, and the National Retail Federation have long supported Association Health Plans. Insurance trade groups, including Bluecross associations, oppose it.