Trump offers new rule going after ObamaCare
A Trump administration proposal to allow more flexibility to groups and small businesses who band together to buy health insurance could undermine the stability of the ObamaCare marketplace, experts warn.
Under a proposed rule released Thursday by the Department of Labor, small businesses and self-employed individuals would be allowed to join together in an “association health plan.”
The proposed rule was issued in response to an executive order by President Trump and would allow those associations to purchase cheaper health insurance that’s not subject to some of the key ObamaCare insurance rules. Republicans blame those rules for rising insurance premiums.
Under current law, small businesses and self-employed workers that buy insurance through associations are considered to be part of ObamaCare’s individual market and are subject to all the law’s rules and regulations.
Association health plans (AHPs) already exist, but they are limited under federal law.
The proposed rule would expand the types of groups that can form an AHP and allow for membership across state lines. It would also allow self-employed individuals to take part in a large-group AHP.
The administration said the proposal could make insurance available for up to 11 million people who lack employer-sponsored coverage.
The proposal would also broaden the definition of “employer” under the Employee Retirement Income Security Act law to allow more flexibility to workers with a “commonality of interest.”
Essentially, this means that employers in unrelated industries can band together in an association, so long as they’re in the same region.
Republicans argue the proposal would give employers more flexibility to choose the insurance plan that works best.
“If made final, this rule should help up to 11 million hard working Americans who don’t have access to employer sponsored coverage and in addition provide new, more affordable options to Americans in the individual market who are getting hammered by skyrocketing premiums,” Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health Committee, said in a statement.
However, the proposal could allow insurers to sell plans that do not cover certain “essential health benefits” like mental health, substance abuse treatment, maternity care and prescription drugs.
The proposal would still retain ObamaCare protections that would prohibit association plans from discriminating against people with pre-existing conditions, and would also retain the prohibition on lifetime limits of benefits.
Retaining the pre-existing conditions protection is important and would “mitigate the extent to which these plans destabilize the current insurance market,” Larry Levitt, a vice president at the Kaiser Family Foundation, tweeted.
Still, critics say AHPs could still find other ways to cherry-pick only the young, healthy people.
“You can be sure they are going to design benefit packages to attract healthier people,” and “siphon them away from the individual market,” said Sabrina Corlette, a professor at the Georgetown University Center on Health Insurance Reforms.
Leaving the less healthy individuals in the individual and small group markets would likely drive up the premiums.
AHPs could also decline to cover prescription drugs, which could discourage sick people from enrolling and, unlike ObamaCare plans, AHPs could charge higher premiums based on age and gender.
The proposed rule noted those concerns but said the risk of a divided market was “small,” especially compared to the benefits to small businesses.
“AHPs’ benefits to their members can be substantial,” the proposal said. “For example, a small business electing less comprehensive AHP coverage can deliver benefits that are more closely tailored to their employees’ actual health needs at a price their employees prefer.”
Chris Condeluci, a healthcare attorney and former Republican Senate Finance Committee counsel, said the benefits of AHPs would outweigh the risks of a divided market.
“I believe the argument of market segmentation has merit, but it cuts both ways,” Condeluci said. “Some young healthy groups may find cheaper coverage, but so might older, sicker groups. If I can spread the risk over 1,000 lives, it will be cheaper, and more attractive for less healthy, older workers.”
Condeluci also noted that even if AHPs won’t have to follow the ObamaCare coverage requirements, they would have to follow state rules.
Some states set some minimum standards for benefits covered by large group policies and “many are as good, if not better than the federal essential health benefit standard,” Condeluci said. “So the argument that coverage offered by AHPs is limited, is a misnomer.”
The Department of Labor cast the new rule as a way to expand access to health coverage, essentially arguing that this would allow more people to afford insurance by allowing the sale of skimpier plans.
“The goal of the rulemaking is to expand access to affordable health coverage, especially among small employers and self-employed individuals, by removing undue restrictions on the establishment and maintenance of association health plans,” the proposal said.
Sen. Rand Paul (R-Ky.) has long been a champion of the AHP concept and has worked closely with the administration on the proposal. Paul on Thursday praised the administration’s efforts.
“Conservative health care reform is alive and well, and I will keep working with President Trump to build on this progress,” Paul said in a statement.
– This report was updated at 2:30 p.m.