Trump officials unveil rule that could chip away at Obamacare
The Trump administration unveiled a proposed rule Thursday that would make it easier for small businesses — and some self-employed folks — to band together and buy health insurance.
The proposed regulation stems from an executive order President Trump issued in October and is the administration’s latest step in whittling away at Obamacare. It would allow small firms to form “small business health plans” based on their location or industry. Sole proprietors would also be eligible to join the plans, which would ideally be able to use their scale to secure less expensive coverage much like large-employer plans do.
The proposal would broaden access to what are known now as association health plans to more Americans and their families. Some 11 million people could be eligible, according to the Department of Labor, which issued the proposed rule.
The associations could provide an attractive alternative to Obamacare for some people, especially younger and healthier consumers. This is particularly true because it would be easier for sole proprietors to join these plans.
“It could cover millions of people who are self-employed,” said an emeritus health law professor at Washington and Lee University School of Law.
That, in turn, could leave the Affordable Care Act exchanges — as well as the broader individual and small business markets — with older and sicker members, essentially turning them into high-risk pools, said Mila Kofman, an expert on association health plans who runs the Washington D.C. exchange.
Insurers would likely raise their rates, further hobbling that market.
The proposal would allow association plans to be regulated the same way large-employer plans are. That would free them from having to adhere to all of Obamacare’s rules, particularly the one requiring insurers to offer comprehensive coverage. So these plans would likely have lower premiums, but 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.
Plus, the proposed regulation would allow associations to base rates on gender, age and industry, which could leave younger men paying less, but older workers and women saddled with higher rates. Currently, the Affordable Care Act bans 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.
The proposal does leave in place — for now — some state oversight of the health plans. Just how this would work isn’t immediately clear. However, some experts worry that the new rule could weaken — or at least leave ambiguous — states’ power to regulate coverage.
This could erode consumer protections, said Sabrina Corlette, research professor at Georgetown University’s Health Policy Institute. For instance, states can ensure that the plans have enough funding to operate and can mandate that certain benefits be covered.
Association health plans, which have existed for decades and have a history of fraud and insolvency, have long been a favorite tool of Republicans. Trump and Republican Senator Rand Paul of Kentucky had been pushing to change their regulation so the plans could be sold across state lines with little, if any, local oversight. The goal would be to give consumers more options.
The proposed rule makes it clear that plans would be able to offer coverage in multiple states. For instance, it said that an association could be formed in a metropolitan area that encompasses multiple states — such as the New York or Washington D.C. regions. Also, an association can sponsor coverage outside of the state where it is based.
Just how much impact this regulation has on Obamacare depends on whether it really spurs more businesses to create or join association health plans. Last year, 6 percent of firms with fewer than 250 workers that offered health benefits did so through a trade or professional association health plan, according to a Kaiser Family Foundation/HRET survey.
Already, the National Retail Federation and International Franchise Association have praised the proposed rule.
“For years, we’ve called for AHPs to ensure that heath care coverage is within reach for small retailers and their employees, and today’s action by [the Department of Labor] brings us one step closer to making this commonsense reform a reality,” said David French, the federation’s senior vice president for government relations.
The Department of Labor is soliciting comments — including on whether it should preempt state regulation of these plans — for 60 days.
Trump’s executive order, which he said was aimed at increasing choice and competition, also called for federal agencies to look at changing the rules governing short-term insurance policies and health reimbursement arrangements. Those regulations have yet to be issued.
The Obama administration limited the duration of short-term health plans to no more than 90 days in order to make them less attractive. The executive order is expected to lift that cap, enabling consumers to buy policies that would last just under a year.
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.
Health reimbursement arrangements allow employers to give workers cash to buy coverage elsewhere.
Both would further erode the potential pool of Obamacare enrollees.