The U.S. Department of Labor announced a recent rule change which will grant access to affordable health insurance plans for self-employed and sole proprietors and their families, according to a release by the U.S. Department of Labor. This Association Health Plan (AHP) reform will address many of the inequities between small and large businesses in access to that coverage.
Under the department’s new rule, AHPs can serve employers in a city, county, state, or a multi-state metropolitan area, or a particular industry nationwide. Sole proprietors, as well as their families, will be permitted to join such plans. In addition to providing more choice, the new rule makes insurance more affordable for small businesses.
Just like plans for large employers, these plans will be customizable to tailor benefit design to small businesses' needs. These plans also will be able to reduce administrative costs and strengthen negotiating power with providers from larger risk pools and greater economies of scale, the Labor Department stated. This reform allows small employers a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers.
“President Donald J. Trump is expanding affordable health coverage options for America’s small businesses and their employees. Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies,” Labor Secretary Alexander Acosta said in the release. “AHPs are about more choice, more access, and more coverage. The president’s decision helps working Americans – and their families – purchase quality, affordable health coverage.”
Consumer advocates had called on the Trump administration to mandate that association plans cover the same broad set of benefits as Affordable Care Act plans. However, the Labor Department rejected the suggestion, concluding that it would raise costs and restrict the coverage options available to small businesses and independent contractors, according to a report in Politico.
Many business groups praised the new rules. The National Federation of Independent Business (NFIB) is among the most ardent supporters of the new proposal.
“In the wake of the Senate’s failure to repeal Obamacare, we are grateful to President Trump for addressing regulations that make it harder and costlier for small business owners to provide healthcare for themselves and their employees,” NFIB CEO Juanita Duggan said in a statement.
Administration officials said the final proposal contains consumer protections, including prohibitions on discrimination against customers with expensive medical conditions. That could reassure critics but may limit the ability of the plans to hold down costs, Politico reported.
The rule includes several safeguards. Consumer protections and healthcare anti-discrimination protections that apply to large businesses also will apply to AHPs organized under this rule. The Congressional Budget Office (CBO) estimates that millions of people will switch their coverage to more affordable and more flexible AHP plans and save thousands of dollars in premiums. CBO also estimates that 400,000 previously uninsured people will gain coverage under AHPs.
“The new rule does not affect previously existing AHPs, which were allowed under prior guidance. Such plans can continue to operate as before, or elect to follow the new requirements if they want to expand within a geographic area, regardless of industry, or to cover the self-employed. New plans can also form and elect to follow either the old guidance or the new rules,” the department said.