The Trump administration is expected to release a plan soon that it claims would help lower costs for small businesses struggling to afford health insurance, but the truth is this proposed rule will not fulfill that need.
If enacted, the rule proposed by the U.S. Department of Labor (DOL) would make it easier for insurance companies to sell health insurance across state lines, which would theoretically encourage groups of businesses, such as trade associations, to band together to form what are known as association health plans, or AHPs.
While some insist these plans would be a boon to small business, we as health care experts, insurance regulators, and small business advocates know they would create far more problems than they would solve. Indeed, this is why many state insurance commissioners and others have been sounding the alarm on the proposed rule.
If the current proposal becomes a rule without making clear that states would retain regulatory authority over AHPs, it would destabilize the small group health insurance market by loosening standards that have been in place for decades.
Such a change would open the door for small businesses to fall prey to scams and poorly run associations that may not maintain the necessary money to pay claims, leaving consumers with crippling medical debt. Also, the multi-state composition of AHPs would result in fewer consumer safeguards.
Additionally, AHPs could skirt Affordable Care Act (ACA) rules, including the mandated essential health benefits that require coverage of things such as maternity care, emergency care and prescription drugs, and ACA safeguards that protect against denying coverage for pre-existing conditions or booting people from plans if they require costly procedures.
If AHPs become popular, some small businesses would face huge spikes in health care premiums.
The proliferation of AHPs would cause the small group insurance market to split in two: one pool for businesses that want bare-bones plans and one for firms that need more comprehensive coverage.
Those who need more robust coverage would certainly pay more for it, making it difficult or even impossible for many small employers to afford health coverage for their employees, especially for those with older or sicker workers.
The expansion of AHPs would also have a destabilizing effect on the individual market, since the proposed rule would allow solo entrepreneurs to buy into these plans. Once again, individuals who need more coverage would be left behind to pay much higher premiums that are further inflated by the market split this proposal would trigger.
These concerns partly explain why Pennsylvania is one of several states that currently prohibits the sale of self-funded multiple employer welfare arrangements, including AHPs, that offer coverage to employees of two or more unrelated employers and/or self-employed individuals.
Pennsylvania has a specific regulatory structure to protect the state’s small businesses and other consumers, and while we do not expect all of these rules to be voided by the final DOL rule, the rule would certainly promote confusion and ambiguity if it is not completely clear on state oversight.
It would also unravel the ongoing efforts of Pennsylvania and other states to ensure access to comprehensive health coverage through the ACA. Specifically, under the leadership of Gov. Tom Wolf, these efforts have resulted in an additional 1.1 million Pennsylvanians having health insurance and an uninsured rate of just 5.6 percent–an all-time low.
What’s more, nationally the number of uninsured small business employees dropped by 4.1 million between 2013 to 2015, while the uninsured rate for solo entrepreneurs fell by 38 percent. Altering the health care landscape, whether by expanding AHPs or other efforts, will undermine health options for everyone, including those in the small business community who struggled for years to access more affordable coverage.
Unfortunately, there is no way for the DOL to alleviate all of our concerns about AHPs if the proposed rule is adopted–these plans simply have too many inherent problems.
If the Trump administration remains determined to move forward with the rule, it must affirm that it does not limit the ability of states to regulate association health plans and additional protections should be included to ensure a level playing field for everyone to minimize destabilization of the insurance market.
If the DOL includes these important safeguards in its final rule, it would allow state insurance commissioners to continue to enforce rules they deem to be in the best interest of their state’s small businesses and consumers.
The Trump administration is correct that small businesses need access to affordable health insurance, but options that are largely unregulated and cover almost nothing are not the answer.
Small businesses need quality, affordable health care, and insurance regulators need the authority to protect consumers from bad products. Any final DOL rule on association health plans must satisfy both requirements.
Jessica Altman is the Insurance Commissioner of Pennsylvania. John Arensmeyer is the Founder & CEO of Small Business Majority.