Trump administration will let small businesses offer cheaper health plans

The Trump administration wants to make it easier for small businesses to join together to offer cheaper health-insurance plans that would lack some of the protections required under Obamacare.

The U.S. Labor Department said Tuesday that it plans to issue a rule that would let more small firms and individuals form association health plans, or AHPs. The rule would be phased in, with some types of new association plans allowed to take effect Sept. 1.

President Donald Trump’s administration has touted the change as a way to help small businesses and the self-employed gain access to cheaper health insurance, while avoiding some of the requirements of the Affordable Care Act. Labor Secretary Alexander Acosta said the change will help smaller firms that face rising health costs.

“The rule simply allows small businesses to access the same insurance market, with the same protections, as the one used by large companies,” he wrote in an opinion piece in Tuesday’s Wall Street Journal. “This new scale and access means AHPs can offer more options at a better price.”

An estimated 4 million people will eventually enroll in association health plans, the Congressional Budget Office said in May. Enrollees are likely to be healthier people with higher incomes, who will see lower premiums than in the ACA’s markets, the CBO said.

Avoiding Obamacare

The rule allows companies or individuals involved in the same type of business or located in the same region to form associations. Like health coverage offered by big employers, the plans wouldn’t be subject to Obamacare’s requirement that they cover 10 types of essential benefits, such as hospitalizations, drugs and maternity care.

Other ACA rules do apply, however, including caps on how much an individual has to pay out of pocket in a year, and bans on lifetime or annual limits for services covered. All plans are also required to cover a list of preventive services with no out-of-pocket costs to the beneficiary. And they won’t be able to charge different rates to people based on how healthy or sick they are.

Some consumer groups have warned that the plans could harm access to care for sick people. The American Cancer Society Cancer Action Network, for example, said the rule could make it harder for people to get comprehensive insurance coverage by offering plans that would leave gaps if they were to get sick.

“Enrollees who signed up for an AHP assuming that they were healthy and in little need of health care could find themselves uninsured for critically needed health care in the event of a serious illness,” the group said. “An AHP could offer lower-cost coverage than non-AHPs simply by not covering expensive cancer drugs or any prescription drugs or could cap the number of hospital.”

State insurance regulators, meanwhile, have warned that the plans could open the door to fraud and abuse, citing a history of unscrupulous practices as well as insolvencies in past iterations of such plans. They’ve said there should be a strong regulatory role reserved for state officials.

(More: DOL proposal on association health plans could help advisers)