The Trump administration unveiled a proposed rule Thursday that would make it easier for small businesses — and some self-employed folks — to band together and buy health insurance.
The proposed regulation, which stems from an executive order President Trump issued in October, would allow small firms to form “small business health plans” based on their location or industry. Sole proprietors would also be eligible to join the plans, which would ideally be able to use their scale to secure less expensive coverage much like large-employer plans do.
The proposal would broaden access to what are known now as association health plans to more Americans and their families. Some 11 million people could be eligible, according to the Department of Labor, which issued the proposed rule.
However, the rule could provide an attractive alternative to Obamacare for some people, especially younger and healthier consumers. This is particularly true because sole proprietors could join these plans.
That, in turn, could prompt insurers to raise rates for those who remain on the Affordable Care Act exchanges.
The small business health plans would not have to adhere to all of Obamacare’s rules, particularly the one requiring insurers to offer comprehensive coverage. So these plans would likely have lower premiums, but also provide fewer benefits — which could leave sicker and older workers out in the cold. Also, the offerings could be less attractive to young women if they don’t cover maternity benefits.
Plus, the proposed regulation would allow associations to base rates on gender, age and industry, which could leave some folks paying much higher rates. Currently, the Affordable Care Act bans basing premiums on gender or industry and limits the amount that can be based on age.
The proposal does leave in place — for now — some state oversight of the health plans. Just how this would work isn’t immediately clear. However, some experts worry that the new rule could weaken — or at least leave ambiguous — states’ power to regulate coverage.
Trump and Republican Senator Rand Paul of Kentucky had been pushing to change the regulation so the plans could be sold across state lines with little, if any, local oversight. The goal would be to give consumers more options.
The Department of Labor is soliciting comments — including on whether it should preempt state regulation of these plans — for 60 days.
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Trump’s executive order, which he said was aimed at increasing choice and competition, also called for federal agencies to look at changing the rules governing short-term insurance policies and health reimbursement arrangements. Those regulations have yet to be issued.
The Obama administration limited the duration of short-term health plans to no more than 90 days in order to make them less attractive. The executive order is expected to lift that cap, enabling consumers to buy policies that would last just under a year.
Short-term plans don’t have to adhere to Obamacare’s regulations so consumers would have a wider array of options with lower monthly rates. But these policies can exclude those with pre-existing conditions or base rates on a person’s medical history. They can also offer skimpier benefits so policyholders may have to pay more out of pocket if they actually need care.
Health reimbursement arrangements allow employers to give workers cash to buy coverage elsewhere.
Both would further erode the potential pool of Obamacare enrollees.