Is it junk or is it a bold, new approach to health insurance plans?
That’s the differing opinions on a new policy from the Trump administration regarding healthcare plans for individuals and small groups.
The Department of Labor has announced new rules regarding association health plans (AHPs), making it easier for small businesses, sole proprietors, and trade associations to offer healthcare to employees.
The new proposed rules follow an October 12 executive order by President Donald Trump that called for purchasing healthcare plans across state lines and allowing for smaller group plans such as AHPs.
For proponents of the Affordable Care Act (ACA), the new rules are just one more attempt to undermine former President Barack Obama’s signature healthcare law by allowing companies to sell what they describe as “junk insurance.”
The new rules come a few weeks after the president signed a tax bill that included a provision to end the ACA’s individual mandate, which required individuals to have insurance or pay a penalty on their tax returns.
Trump and other Republican colleagues argue that expanding small business health plans will give consumers and businesses more flexibility when it comes to offering and choosing a suitable insurance plan.
“By joining together,” the Labor Department wrote in a press release, “employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.”
A look at the new rules
So what exactly do the new rules do?
First, they expand the definition of employer to include individuals and sole proprietors who work in trades or small businesses, even if they are unincorporated.
Membership in an association could also be formed between members across state lines or it could be based on a geographic region.
Second, depending on the size of the association, the health plans might also be exempt from the essential benefits required by the ACA. Those include providing coverage for maternity care, prescription drugs, emergency care, and mental health treatment.
Critics warn that not only do association plans open the door for unscrupulous “junk insurance,” but they also have the potential to draw healthier individuals out of state pools. They say this would create further skyrocketing premiums for those covered under the current ACA plans.
“The Trump administration has declared open season for fraudsters selling junk insurance while those with preexisting conditions will find healthcare further and further out of reach,” Sen. Ron Wyden, (D-Oregon), told Politico.
The New York Times has also investigated claims of fraud and abuse within association health plans. In some cases, the newspaper reported, employees were left with millions of dollars in unpaid medical bills.
“I personally don’t see association health plans as having any positive impact on anyone in America,” Beth Sammis, PhD, president of Consumer Health First, a Maryland-based healthcare reform organization, told Healthline.
“Association health plans can further contribute to the deterioration of the individual market’s risk pool by taking healthy individuals out of a statewide insurance market and putting them someplace else,” she says. “It will also be a race to the bottom, both in terms of insurance regulations that have protected consumers prior to the ACA and after the ACA, at a state level.”
Concerns from organizations
The Labor Department has tried to stem fears about cost and coverage through association plans.
“The proposed rule includes important protections for Americans. Small Business Health Plans (Association Health Plans) cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors,” the Labor Department states.
However, many remain skeptical.
Major organizations, including Blue Cross Blue Shield, the American Cancer Society, and America’s Health Insurance Plans (AHIP) have all signed a letter warning state healthcare commissioners that AHPs would have an adverse effect on insurance pools.
In a statement to Healthline, a spokesperson for AHIP writes:
“Americans deserve affordable choices, and we are concerned that the changes proposed would lead to higher prices and weaker consumer protections in the small group and individual markets, where nearly 40 million Americans get their coverage. We will continue to participate in the formal rulemaking process to recommend alternative solutions to increase competition, choice, and affordability.”
While criticism of association plans has been nearly universal from the left, there are others that say that administration’s recent proposal still doesn’t do enough to remove onerous elements of the ACA.
“I think that Trump is expecting it to provide more choices and affordability to individuals and employers. But, I’m not sure that it will happen,” said Twila Brase, president of the Citizens’ Council for Health Freedom.
“I think it’s federal control over another type of entity that has similar restrictions on it to the ACA in ways that won’t allow for decreased spending,” she told Healthline.
Small group health plans, even if they are association plans, must still abide by mandates of the ACA. Therefore, associations must reach a certain size before they become exempted from things such as essential health benefits.
Brase argues that this does little to give smaller employers the same freedom in healthcare options as larger businesses.
“I would say that the centerpiece of the ACA is the requirement that insurers no longer be insurers — that they cover people with uninsurable conditions and force that cost on everyone in the individual market. So, this doesn’t provide a policy or a plan that gets out from under that requirement,” says Brase.
Still, the effect of expanded association plans, if any, remains to be seen.
Sammis notes that these plans “were never that popular before the ACA.”