A new option on health insurance
The Trump administration has announced new rules for small-business health insurance. Is this an improvement?
What do the new rules say?
The new rules, announced in June, let small businesses band together to create “association health plans,” allowing them to offer health insurance at reduced cost—largely by skirting key mandates of the Affordable Care Act (ACA). Essentially, association plans can offer insurance at lower rates but with reduced benefits. Trump administration officials say they want to “level the playing field” for small businesses, which generally pay more for coverage because they lack the scale and leverage of large employers to get reduced rates from insurers. The Congressional Budget Office predicts that association health plans will enroll 4 million people in the coming years, including 400,000 who were previously uninsured.
How did the ACA affect small businesses?
Under the ACA, or Obamacare, businesses with fewer than 50 workers are not required to provide employees with health insurance. Some do anyway, but as insurance prices have climbed, the percentage of small businesses offering coverage has dropped in recent years. In 2010, 66 percent of firms with three to 49 employees offered health coverage; by last year, that figure had fallen to 50 percent, according to the Kaiser Family Foundation. Trump administration officials blame Obamacare mandates for rising rates: Under the ACA, plans must offer at least 10 essential benefits. Critics of the administration’s new rules say they are part of a concerted effort to undermine the ACA and will result in substandard coverage for millions.
Did association health plans exist previously?
They did, but the Trump administration has made some key changes. First, the rules about which businesses can join forces have been significantly loosened. Now employers from different industries can band together if they are within the same city, county, or state. And employers in the same industry can come together across state lines, for example through a trade association. In addition, sole proprietors and the self-employed can join association plans, which was previously forbidden.
Which ACA requirements are being dropped?
Association plans don’t have to offer the “essential health benefits” currently prescribed for individual and small-business plans. That means they can eliminate coverage in such categories as maternity care, mental health care, preventive care, and prescription drugs. Association plans will still not be able to deny coverage to workers with pre-existing conditions or charge them higher rates. They can, however, base a company’s rates on the gender and age of its workers, its location, and its type of industry, criteria previously barred by the ACA. That means a firm with a lot of older workers or female workers of childbearing age could be charged higher rates, and a business in the construction field could be charged more than one operating in retail.
What’s been the response to the rule change?
Proponents, including the U.S. Chamber of Commerce, the National Retail Federation, and other business groups, say the change is a much-needed boon to small businesses and will increase the number of American workers getting coverage. “Today is a great day for America’s franchise job creators and their employees in the fight for high-quality, less expensive health coverage,” said Robert Cresanti, CEO of the International Franchise Association, when the change was announced. But consumer advocates, insurers such as the Blue Cross Blue Shield Association, and congressional Democrats say the rules will gut important protections and lead to a spike in “junk health plans.” More than 95 percent of the health-care groups that filed comments about the proposed change during a review period opposed it or expressed serious concern, according to an analysis by the Los Angeles Times. “Basically anybody who knows anything about health care is opposed to these proposals,” said Sandy Praeger, a former president of the National Association of Insurance Commissioners.
Have any other objections been raised?
Critics point out that association health plans have a long history of fraud and insolvency. Between 1988 and 1991, such plans defaulted on more than $123 million in claims, according to the U.S. Government Accountability Office. Just this year, the Labor Department filed suit against an association health plan in Washington state whose officers allegedly charged millions in excessive fees and used assets for their own gain. “Fraudulent association health plans have left hundreds of thousands of people with unpaid claims,” said Marc I. Machiz, a former Labor Department investigator. Watchdogs say the new rules could open the door for scam operators and lure individuals who believe they’re buying better coverage than they’re actually getting. This creates a key role for regulators on the state and federal level. Timothy Jost, an expert in health law at Washington and Lee University, said the rule changes put the onus on workers buying into association plans to read the fine print. “I think consumers are going to be in for a pretty wild ride,” Jost said. ■