Last year, President Trump issued an executive order directing federal agencies to develop “a healthcare system that provides high-quality care at affordable prices for the American people.” Recently, the U.S. Labor Department began implementing one of the stated goals of this executive order by issuing a proposed rule on “association health plans” (AHPs).
On January 5, the Labor Department asked for comments on this proposal, which would allow business associations to sell to small business an insurance plan similar to what many large companies offer to their employees under the federal Employee Retirement Income Security Act (ERISA). Health insurance plans that comply with ERISA are exempt from state law and are regulated by the Labor Department, but to create such a plan is cumbersome even for some large businesses. Proponents say that small businesses would be able to obtain the economies of scale and flexibility that large companies enjoy under ERISA, but opponents argue that AHPs would destabilize state insurance markets and put consumers at risk.
The proposed regulation turns on how to interpret ERISA’s interpretation of “employer.” Currently, business associations like local Chambers of Commerce may offer health insurance to their members, but these insurance policies are regulated by state insurance commissioners. Under Labor’s proposal, the definition of an “employer” would be broadened so that small businesses in the same industry or same geographic region could band together and create an association that could offer a plan similar to a large company might under ERISA. (For a more in-depth overview, click here.)
Many business groups have supports AHPs as a way to achieve equity between large and small businesses. For example, the National Restaurant Association noted that allowing AHPs would be “a key step in leveraging the buying power of small businesses.” The Society for Human Resource Management added that AHPs “could provide an option for small employers to offer competitive and affordable health benefits to their employees, thereby increasing the number of Americans who receive coverage through their employer,” but likely would have little effect on most midsize-to-large employers.” On the other hand, consumer groups, state officials, and Blue Cross plans argue that AHPs would weaken existing state and federal protections, destabilize the individual and small group markets, and prevent state insurance regulators from policing bad actors. Opponents point to problems with a similar policy, multiple employer welfare arrangements (MEWAs), which ultimately led to Congress to pass a law clarifying that states could regulate MEWAs. Additionally, groups like the National Governors Association and the National Association of Insurance Commissioners have opposed legislative attempts to create AHPs for similar reasons.
Comments on the proposal are due to the Labor Department by March 6.