In October, President Trump issued an executive order instructing his appointees to prepare to deregulate health insurance in certain specified ways. Today the Department of Labor is following through on one part of the order: enabling wider use of “association health plans.”
The idea is to allow small businesses to band together to purchase health insurance for their employees — achieving economies of scale, getting negotiating power, and enjoying some of the same regulatory benefits that larger businesses enjoy. Thus small businesses in Columbus, Ohio, could get insurance through the Columbus Chamber of Commerce; restaurants around the country could get it through the National Restaurant Association. The Congressional Budget Office estimates that by 2023, around 4 million people would take advantage of this option.
Opposition to these health plans stresses two points. The first is that they will not be required to provide the “essential health benefits” mandated by the Affordable Care Act, a/k/a Obamacare. A senior official in the Department of Labor responds to this criticism by noting that large businesses are already exempt from that requirement; the new rules merely create a more level playing field for small businesses.
The second criticism is that association health plans would further destabilize Obamacare’s exchanges. Some healthy people who would have bought insurance on the exchanges will be insured through AHPs, leaving the exchanges with a sicker and more expensive population. (The CBO estimates that 90 percent of AHP participants would have had insurance even in their absence.) Premiums on the exchanges will therefore rise.
The Labor Department official concedes that some effect of this type is likely to happen. But he notes that many exchange participants are shielded from premium increases by subsidies, and that AHP participants are likely to save a lot on premiums. Avalere’s projection of the effects, which is pessimistic with respect to coverage levels and exchange premiums, also notes that “[p]remiums in the new AHPs are projected to be approximately $2,900 a year lower compared to the small group market and $9,700 a year less compared to the individual market.”
Like other health-policy changes during the Trump administration — notably the end of the “individual mandate” fining people for going without health insurance — this one will free some people to leave the exchanges and thus make the exchanges have more of the character of a highly subsidized high-risk pool. Republicans have long advocated high-risk pools as a solution for the hardest-to-insure population. In any case, keeping an arbitrarily-defined group of people — those who work for small businesses that don’t offer health insurance — from having more attractive options in order to provide a hidden subsidy for the exchanges does not seem like a policy Republicans should have any qualms about abandoning.