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Labor Department Wants to Expand Association Health Plans

News  |  By Gregory A. Freeman  
   January 08, 2018

In a move that would fulfill a campaign promise, the Trump administration's proposal would allow people across states to jointly purchase health plans.

A proposal from the Department of Labor would allow people in similar lines of work and in different states to join together for the purpose of buying health plans, expanding the availability of Small Business Health Plans, also known as association health plans.

Under the proposal, self-employed people and small businesses could form groups large enough to let them qualify for the savings of group health plans. They also could access plans that do not meet the requirements of the Affordable Care Act, making them less expensive.

Related: California Winces At Trump's Turn Back To 'Bad Old Days' Of Health Plan Associations

President Donald Trump repeatedly called during the campaign for easing the restrictions on consumers’ ability to purchase healthcare insurance across state lines. This proposal is seen as one step in that direction.

The Labor Department notes that up to 11 million Americans working for small businesses or who are sole proprietors lack employer-sponsored insurance and could find coverage under this proposed change to the Employee Retirement Income Security Act (ERISA).

“Many small employers struggle to offer insurance because it is currently too expensive and cumbersome. These employees – and their families – would have an additional alternative through Small Business Health Plans (Association Health Plans),” the Labor Department said in statement announcing the proposal. “These plans would close the gap of uninsured without eliminating options available in the healthcare marketplace.”

The proposed rule applies only to employer-sponsored health insurance. It would allow employers to join together as a single group to purchase insurance in the large group market, which the Trump administration says would open health insurance coverage for millions of Americans and their families by giving them access to economies of scale.

These are the main components of the proposal:

  • Allow employers to form a Small Business Health Plan on the basis of geography or industry. 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.
  • Allow sole proprietors to join Small Business Health Plans, clearing a path to access health insurance for the millions of uninsured Americans who are sole proprietors or the family of sole proprietors.

The proposed regulation would not restrict the size of the employers that are able to participate in a group or association of employers, but the Labor Department says it expects minimal interest among large employers in establishing or joining an association health plan because they already enjoy many of the large group market advantages that the proposal would afford small employers.

The proposed rule includes some restrictions. Most notably, Small Business Health Plans would not be allowed to charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors.

“The proposed definition includes conditions, including nondiscrimination provisions, designed to continue to draw a line between the sorts of employer-sponsored arrangements that are regulated by ERISA on the one hand, and commercial insurance-type arrangements that lack the requisite connection to the employment relationship on the other, as well as to prevent potential adverse impacts on the individual and small group markets,” the proposal says.

Some small businesses that did not previously offer insurance to their employees might be encouraged to enroll in association health plans, the proposal states. Other businesses might switch from their existing arrangement to the newly available plans.

“In addition, the option for small employers to join association health plans could offer better financial protection to employers (and their employees) than if they self-insured and purchased stop-loss insurance that may not adequately protect them from financial risk,” the proposal says. 

Gregory A. Freeman is a contributing writer for HealthLeaders.

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