Trump Administration Releases Final Rule on Association Health Plans

The Department of Labor released the final version of the Association Health Plan rule that will allow businesses to form organizations in order to purchase health plans that are not subject to the ACA’s standards.

The new rule is intended to expand access by creating cheaper health insurance options for small businesses and self-employed Americans. The plans are expected to be less expensive due to their pared down coverage requirements, that will not have to meet the ACA’s community rating and essential benefits requirements.

Alexander Acosta, secretary of the Department of Labor, told reporters that the new rule will enroll up to 400,000 patients who did not previously have access to affordable health insurance. He said that in total the rule could enroll up to 4 million patients.

“The Trump Administration hopes to level the playing field between large companies and small businesses by expanding access to association health plans,” he said. “This expansion will offer millions of Americans more affordable coverage options.”

“For the first time ever, sole proprietors will be able to buy lower-cost group insurance instead of getting ripped off by this disaster we all know as Obamacare,” President Trump said while announcing the final rule at a National Federation of Independent Business meeting.

However, critics have noted that by creating an insurance marketplace that is separate from the ACA will drive healthier patients from more costly ACA plans to cheaper Association Health Plans—further increasing premiums for sicker patients with ACA plans. Furthermore, insurers in the ACA marketplace will be faced with incurring a higher risk burden by taking on a sicker pool of patients.

In March, the AHIP explained that reducing premiums and increasing access is an important issue that needs addressing; however, association health plans will only exacerbate current market instability.

“We believe that association health plans as envisioned by the [Department of Labor] are the wrong way to achieve these goals due to the risks of fraud and insolvency they pose to consumers,” AHIP wrote in a statement to the rulemaking committee. “We further believe that creating a different set of rules for different market actors will disturb insurance markets in a way that runs counter to Department of Labor’s stated objectives.”

In February, First Report Managed Care looked into how the return of association health plans will impact the market. Our experts noted that association health plans will likely not have much of an impact due to the small amount of plans that will be offered and the small amount of eligible enrollees.

“It seems that [association health plans] are a solution to a narrow problem and will have a limited impact on the broader insurance risk pool,” Melissa Andel, MPP, vice president at Applied Policy, said. “Perhaps in some localities or states a successful association health plan will be able to draw away enough healthy customers looking for lower premiums, but I don’t see it being big enough to totally undermine the market at large.” 

CMS noted that the number of eligible enrollees could increase if more small businesses opt-in to association health plans as a result of the new rule.

“The number of small businesses that offer health coverage has been declining for years and Obamacare did nothing to reverse this trend,” Seema Verma, MPH, administrator of the CMS, said in a press release. “The rule released today levels the playing field between small and large employers by providing new opportunities for small employers to band together to gain the same health insurance options as large employers. Association Health Plans will provide broader access to better health coverage for small business employees and their families. We are pleased to partner with the Department of Labor in this important work.”

—David Costill

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