The U.S. Department of Labor (DOL) has released a proposed rule to expand the use of association health plans (AHPs), allowing more small businesses, trade organizations and individuals to buy health coverage as a group.
The proposed regulation follows up on an executive order signed by President Donald Trump directing federal agencies to loosen restrictions on AHPs and short-term health coverage which may not comply with benefit requirements in the Affordable Care Act. The administration’s argument for the change has been it will expand the employer-sponsored health insurance market to customers who find current plans “too expensive and cumbersome.”
“The proposed rule, which applies only to employer-sponsored health insurance, would allow employers to join together as a single group to purchase insurance in the large group market,” DOL said in a press release. “These improvements stand to open health insurance coverage for millions of Americans and their families by making it more affordable for thousands of small businesses and sole proprietors. By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.”
Here are five important things to know about the proposal and the reaction from opponents and supporters:
1. Changes for small businesses
The proposed rule said current DOL standards may subject AHPs to regulations for large group, small group and individual market plans simultaneously, undermining “one of the core purposes and advantages of forming or joining an AHP.” Under this regulation, health coverage sponsored by an employer association would be treated as a large group health plan that can then purchase coverage away from the ACA markets.
Other changes include allowing employers to form an AHP and purchase from the large group market based on their industry or their location. This would mean plans could expand across state lines, a frequently touted proposal from the Trump administration.
2. Changes for self-employed workers
The rule also aimed to expand access to AHPs for individuals. It would allow the self-employed to “act as employers for purposes of participating in an employer group or association and also be treated as employees of their businesses for purposes of being covered by the group or association’s health plan.”
3. Plans may be skimpier than ACA exchange coverage
By defining AHPs as large group plans, they would be exempt from a slew of ACA requirements, including the law’s essential health benefits, charging customers more based on pre-existing conditions and the medical-loss ratio (MLR) provision requiring insurance companies to spend at least 80 or 85 percent of premium dollars on medical care.
“These differences in obligations result in a complex and costly compliance environment for coverages provided through associations, particularly if the coverages are simultaneously subject to individual, small group, and large group market regulation,” the rule stated.
Georgetown University professors Kevin Lucia, MHP, and Sabrina Corlette wrote in Oct. 2017 that similar provisions would create an “uneven playing field” between AHPs and other markets, while undermining consumer protections from the ACA.
4. Who’s opposed
Trump’s executive order which had led to the proposed rule had been opposed by Democratic politicians as well as some healthcare industry groups. In a joint statement, the American Academy of Pediatrics, American Academy of Family Physicians, the American College of Physicians, the American Congress of Obstetricians and Gynecologists, the American Osteopathic Association, and the American Psychiatric Association, had criticized AHPs and short-term plans as a path to destabilizing the ACA exchanges.
“Our organizations strongly reject a marketplace that allows insurers to discriminate against any individual based on their health status, age or gender,” they wrote in October. “Allowing insurers to sell narrow, low-cost health plans likely will cause significant economic harm to women and older, sicker Americans who stand to face higher-cost and fewer insurance options.”
America’s Health Insurance Plans (AHIP), the largest lobby for the insurance industry, was neutral on the order, saying it would evaluate future rulemaking on the principles of “competition, choice, patient protections and market stability.”
5. Who’s in favor
Conservative groups and federal lawmakers, however, paint AHPs as a means to increase competition and lower premiums.
“For the past year, I have worked with the President and his administration to dramatically increase the availability of health care while at the same time decrease the costs,” Sen. Rand Paul, R-Kentucky, said in a statement. “I applaud the administration for its action today, and I look forward to the finalization of the proposed rule. Conservative health care reform is alive and well, and I will keep working with President Trump to build on this progress.”
The proposed rule also has the support of the National Retail Federation, which said AHPs “would help small businesses compete with large companies in providing health insurance at affordable rates.”