Officials roll out new rule for small business health insurance plans
The Trump administration took the final step in its plan aimed at making health insurance policies cheaper for some small businesses.
The administration released its final rule governing association health plans, which allow small businesses and the self-employed to band together based on their industry or location and buy health insurance. The rule stems from an executive order that President Trump signed in October aimed at providing alternatives to the Affordable Care Act.
But the move is expected to weaken some of the Affordable Care Act’s consumer protections for those buying these plans and make coverage more expensive for those who remain on the Obamacare exchanges.
The rule allows association health plans to be regulated in the same way as large employer policies. That would free them from having to adhere to some of Obamacare’s rules, particularly the one requiring insurers to offer comprehensive coverage. Plans can start being offered as soon as September 1.
“Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies,” said Labor Secretary Alexander Acosta. “AHPs are about more choice, more access, and more coverage.”
These plans would likely have lower premiums, but they would also provide fewer benefits — which could leave sicker and older workers out in the cold. Also, the offerings could be less attractive to young women if they don’t cover maternity benefits.
The proposed regulation would allow associations to base an employer’s rates on the gender, age and industry of its workers, which could leave firms with many younger men paying less, but those with older workers and women saddled with higher premiums. Currently, the Affordable Care Act bans insurers from basing premiums on gender or industry and limits the amount that can be based on age.
However, plans would not be allowed to set premiums based on workers’ health status, which critics of the executive order had feared.
It also maintains state regulators’ oversight of these policies. This allows them to retain some say in what benefits are offered and to monitor the financial health of the plans, depending on how the associations are set up. Many state regulators have been very wary of association health plans, citing their long history of fraud and insolvency.
Consumer watchdogs are concerned that the association health plans will siphon off younger and healthier workers, leaving older and sicker Americans in the Obamacare exchanges for individuals and small firms.
Some 3.2 million enrollees in Obamacare’s individual and small group markets could shift their coverage to these new policies, according to an analysis by Avalere Health, a consulting firm. Losing those enrollees could prompt insurers to raise rates by 3.5% on the Obamacare individual market and 0.5% in the small business exchanges.
Those buying association health plans could see their premiums drop $9,700 a year compared to the individual market and $2,900 a year versus the small business exchanges. That’s largely because the plans will offer less generous benefits and have healthier enrollees, according to Avalere.
Avalere’s projections for the plans’ enrollment are roughly in line with the Congressional Budget Office’s estimate of 4 million members. In addition, the CBO also noted that about 10% of the 4 million people buying these plans in 2023 and beyond would have been uninsured otherwise.
Many patient advocacy groups have spoken out against the Trump administration’s move, saying they’re concerned it could lead to more instability in the individual and small business markets and leave policyholders paying more for needed care.
“We expect this new federal law will spark a rise in both insurers refusing to pay medical bills and medical bankruptcies, both of which have fallen since 2010, when the health law went into effect,” said Frederick Isasi, executive director of Families USA, a left-leaning advocacy organization. “When the people who are tricked into buying these cheap, junk plans need their health insurance to cover their medical care, they’ll realize they’ve been swindled out of their money with no comprehensive health coverage to show for it.”
Association health plans, which have existed for decades, have long been a favorite tool of Republicans. Several industry groups have praised Trump’s effort to broaden eligibility.
“Today is a great day for America’s franchise job creators and their employees in the fight for high quality, less expensive health coverage,” said Robert Cresanti, chief executive officer of the International Franchise Association.
Catherine Monson can’t wait to set up an association health plans that her franchisees can offer their workers. She’s the chief executive of FASTSIGNS International, a signage and visual graphics company that has more than 600 locations and 6,000 employees across the country.
“Our franchisees compete with big companies for labor,” said Monson, a longtime advocate of the plans. “We want to have the same benefits at about the same price.”
Associations will likely offer members a range of policies, including some that are more comprehensive, said Chris Condeluci, who runs CC Law & Policy, a health care legal and policy practice, and supports the administration’s move. Some may opt to raise the rate of the more basic plans in order to lower the premiums of the ones with richer benefits.
The Trump administration is also readying the final rule for short-term health plans, which would serve as another alternative to Obamacare. Officials are expected to allow these plans to be sold for up to a year, as opposed to the current 90-day limit.
Short-term plans don’t have to adhere to Obamacare’s regulations so consumers would have a wider array of options with lower monthly rates. But these policies can exclude those with pre-existing conditions or base rates on a person’s medical history. They can also offer skimpier benefits so policyholders may have to pay more out of pocket if they actually need care.