The DOL plan puts into action an executive order signed by President Trump in October.
After previous attempts to fully repeal the Affordable Care Act failed in Congress, the Department of Labor proposed new healthcare insurance rules that would permit small businesses and self-employed proprietors to band together to buy medical coverage for themselves and their employees. An executive order signed by President Trump in October laid the groundwork for the proposal, which the DOL estimates would cover 11 million people if enacted.
Under the proposal, small business owners and self-employed people could form an association provided that they work in the same industry or are located in the same geographic area. The group could then purchase health insurance plans for its members, as larger employers do for their employees. The plans offered by these associations would not have to comply with the ACA’s essential health benefits mandate, which requires insurers to provide coverage for services such as substance abuse, maternity care, and prescription drugs.
Changing the System
The DOL proposal for Small Business Health Plans adheres to the ACA in one aspect: it would prohibit associations from excluding membership to those with pre-existing conditions or any person because of their health history. Associations would be exempt, however, from the ACA rule blocking health insurers from charging older members triple the premium of a younger enrollee.
Underpinning the DOL’s proposed policy change is a re-definition of an employer under the Employee Retirement Income Security Act of 1974 (ERISA), a federal law governing the health and retirement plans large employers offer to employees. Since current regulations by definition exclude associations, those groups fell within the small group and individual insurance marketplace administered under the ACA.
As outlined under current ERISA law, associations must provide more to members than just health coverage. The DOL’s proposal would eliminate that regulation, and it would also permit associations to sell policies to members in different states.
The Great Debate
As with previous healthcare reform proposals, the DOL motion stirred up heated debate among stakeholders. Conservative advocates contend that the proposal will lower health insurance premiums by offering less expensive plans to individuals who may not need all the health services mandated by the ACA.
Small business trade groups also support the DOL’s recommendation since it would enable small business owners to offer their employees attractive healthcare coverage just as large employers do. “Main Street retailers need more affordable health-care options and a level playing field with larger companies that are better positioned to negotiate for lower insurance costs,” David French, SVP for government relations at the National Retail Federation, said in a statement to the Wall Street Journal.
Critics of the association proposal say that giving self-employed individuals a health insurance alternative beyond the individual ACA marketplace would prompt healthier people to leave the state exchanges. If that happens, the ACA marketplace would be further destabilized, leading to higher rates for sicker individuals who continue to purchase ACA policies.
“We are concerned that this could create or expand alternative, parallel markets for health coverage, which would lead to higher premiums for consumers, particularly those with pre-existing conditions,” said a letter from groups including America’s Health Insurance Plans.
Healthcare consultant Christopher Condeluci, who worked with the GOP in the Senate during the original passage of the ACA, told Modern Healthcare that concerns over weakened consumer protections under association plans were “overblown.” Such plans, he explained, would be governed by strict state and federal insurance regulations, including the requirement that employers cover at least 60% of a member’s benefit costs.
Condeluci, who now works as a counsel to the Self-Insurance Institute of America, Inc., acknowledged that many healthier people might exit the small group or individual markets, but he added that sicker and older individuals could find cheaper insurance through an association. “In the end, maybe it’s a wash,” he said. “Or at least the impact of the market segmentation is not as pronounced as critics are making it out to be.”
The proposed DOL association rule was published January 5 in the Federal Register. A 60 day public comment period has since begun.