The U.S. Department of Labor (DOL) on Tuesday released a new health care rule expanding access to association health plans (AHPs) that wouldn’t be subject to the Affordable Care Act’s (ACA) requirements on essential health benefits coverage—despite warnings that the rule will raise premiums for anyone who needs comprehensive health coverage.
Agency Sec. Alexander Acosta touted the supposed flexibility and potential savings of AHPs in a statement announcing the new rule. “AHPs are about more choice, more access, and more coverage,” he claimed. “The President’s decision helps working Americans—and their families—purchase quality, affordable health coverage.”
But health experts say the new rule could make the more comprehensive ACA marketplace plans more expensive for those who are sick or have regular health needs, including women, people with pre-existing conditions, and anyone who uses prescription medication.
“I think when you boil a lot of it away, what you’re left with is the administration has made it possible for self-employed individuals and for small employers to have a parallel market where they can seek health benefits,” said Karen Pollitz, senior fellow for health reform and private insurance for the nonpartisan Kaiser Family Foundation. “That will be called an association health plan, and in the association health plan market, not all of the rules would apply that currently apply in the individual and small group market.”
Association health plans are a way for a “group of small businesses [to] pool together to have more purchasing power and get access to cheaper premiums,” according to Vox’s Sarah Kliff. “Before the ACA, national associations could pick and choose which states’ insurance rules they wanted to follow, and use those nationwide,” explained Kliff in 2017. “The result was often health insurance that skirted state rules and advantaged businesses with young and healthy employees, who are likely to prefer skimpier health plans.”
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Prior to the new rule, AHPs were regulated under the ACA in the same way as individual and small groups, meaning they must cover ten essential basic health care needs such as maternity care, prescription drugs, emergency services, mental health services, preventive care (including contraceptives), and hospitalization. Previous to this rule, individuals and self-employed people were generally not allowed to buy AHPs, a restriction which has now been lifted.
However, the new Trump administration rule allows small businesses and self-employed people to bind together solely for the purposes of buying health insurance and be regulated as a large group plan not subject to the ACA’s minimum coverage requirements. The new rule “does not affect previously existing AHPs,” according to the DOL’s press release.
While AHPs might be an appropriate option for perfectly healthy people who don’t need comprehensive coverage, the new rule essentially creates a second insurance market for healthy people. It’s a change that Pollitz, who worked on implementation of the ACA while employed at the Department of Health and Human Services, says will drive up premiums for people who need the comprehensive coverage of an ACA plan because they are pregnant, have a pre-existing condition, or need mental health care, among other reasons.
“When healthy people leave the pool for the ACA-regulated plans, the premium for that coverage goes up,” she said. “Risk pools only work if everyone participates all the time. Most of us are healthy most of the time but we all get sick or need health care some of the time. For insurance to be affordable, you need most of the policyholders to be paying premiums and not using very many services. This [rule] messes up that arrangement, and it lets people go someplace else while they think they can afford lesser coverage.”
In addition to exemptions from the comprehensive coverage requirements, since they will be considered large group plans, AHPs will be allowed to charge different rates based on gender, age, occupation, and geography. So for example, women could be charged higher premiums because they may eventually become pregnant, or we could see a return to redlining—a practice where people from neighborhoods where marginalized people live may end up being charged more for the same health care coverage.
In a statement regarding the new rule, Senate Health, Education, Labor and Pensions Committee Chair Lamar Alexander (R-TN) touted it as a needed expansion of affordable health policies. “To the plumber in Memphis, the songwriter in Nashville, or the bakery owner in Chattanooga, who have been paying through the nose since Obamacare took effect, who might be making $60,000 dollars per year and paying $20,000 for health insurance and who is very likely not receiving a subsidy, the Trump Administration appears to have found a potential solution.”
Democratic lawmakers have countered, arguing that the Trump administration has authorized the sale of low-quality health insurance policies. “By allowing the sale of junk plans, the rule will remove younger, healthier individuals from insurance pools, which will drive up the cost of coverage for all other Americans,” said Reps. Bobby Scott (D-VA), Richard Neal (D-MA), and Frank Pallone Jr. (D-NJ) in a joint statement released Tuesday. “When people in these low-quality health plans unexpectedly need care, they are often surprised by excessive out-of-pocket costs, which can drive families into bankruptcy and force everyone else to absorb the cost of unpaid medical bills.”
AHPs have a controversial history of fraud due to their lack of essential services coverage. California announced this week that AHPs won’t be allowed to operate in the state because they are considered as a type of Multiple Employer Welfare Arrangement (MEWA), which were banned in the state 1995. “Some MEWAs have had a troubling history in California, including cases of MEWA fiscal insolvency, inability to pay consumer claims, and allegations of fraud, so California law prohibits the formation of any new MEWAS,” California Insurance Commissioner Dave Jones said in a statement.
The New York and Massachusetts attorneys general have already announced a lawsuit challenging the new rule.
The rule, which allows companies to begin selling AHPs on September 1st, is the latest in a series of regulatory moves meant to undermine the ACA after efforts by Congress to repeal the law fell short.