The Labor Department issued a final rule authorizing the expansion of association health plans over the objections of virtually everyone who weighed in on the proposal, including small businesses. Such broad opposition was with good reason.
The new rule may make it easier for a few small businesses with younger and/or healthier employees to purchase association health plans, but the trade-off is that these plans will cause the insurance market for small businesses to split, leading to major increases in premiums. These multistate plans will not have to include protections for people with preexisting conditions, nor will they be required to cover things such as maternity care. Also, the association-health-plans rule is redundant because small businesses are already allowed to work together to purchase health insurance. That system is called the small-group market, and the more people we have in this pool, the lower premiums will be for participants. Encouraging people to leave the small-group market, however, will harm small businesses by raising their premiums.