Trump to Let Small Businesses Offer Cheaper Health Plans

(Bloomberg) -- The Trump administration wants to make it easier for small businesses to join together to offer cheaper health-insurance plans that lack some of the protections required under Obamacare.

The U.S. Labor Department on Tuesday issued a rule that would let more small firms and individuals form association health plans, or AHPs. The rule will be phased in, with some types of new plans allowed to take effect starting Sept. 1.

President Donald Trump’s administration has touted the change as a way to help small businesses and the self-employed gain access to cheaper health insurance, while avoiding some of the requirements of the Affordable Care Act. Labor Secretary Alexander Acosta said the change will help smaller firms that face rising health costs.

“The rule simply allows small businesses to access the same insurance market, with the same protections, as the one used by large companies,” he wrote in an opinion piece Tuesday’s Wall Street Journal. “This new scale and access means AHPs can offer more options at a better price.”

An estimated 4 million people will eventually enroll in association health plans, the Congressional Budget Office said in May. Enrollees are likely to be healthier people with higher incomes, who will see lower premiums than in the ACA’s markets, the CBO said.

“You’re going to save massive amounts of money and have much better health care,” Trump said Tuesday in a speech to the National Federation of Independent Business in Washington. “You’re going to save a fortune and you’re going to be able to give yourselves and your employees tremendous health care.”

Avoiding Obamacare

The rule allows companies or individuals involved in the same type of business or located in the same region to form associations. Like health coverage offered by big employers, the plans wouldn’t be subject to Obamacare’s requirement that they cover 10 types of essential benefits, such as hospitalizations, drugs and maternity care.

Other ACA rules do apply, however, including caps on how much an individual has to pay out of pocket in a year, and bans on lifetime or annual limits for services covered. All plans are also required to cover a list of preventive services with no out-of-pocket costs to the beneficiary. And they won’t be able to charge different rates to people based on how healthy or sick they are.

Chris Lu, former deputy secretary of labor in the Obama administration and now a senior fellow at the University of Virginia Miller Center, said the rule is designed to undercut the ACA. Trump campaigned on a vow to repeal Obama’s signature law.

“The overall effect of today’s action will be skimpier health plans and higher insurance premiums, which will lead to more Americans getting sick and dying,” he said by email.

Some consumer and patient groups also warned that the plans could harm access to care for sick people. Twenty six groups including the American Diabetes Association, the American Heart Association, Consumers Union and the National Alliance on Mental Illness issued a statement opposing the rule.

“Consumers will pay much more for comprehensive coverage or end up with substandard plans that leave both their health and financial security at risk,” the groups said.

State insurance regulators, meanwhile, have warned that the plans could open the door to fraud and abuse, citing a history of unscrupulous practices as well as insolvencies in past iterations of such plans. They’ve said there should be a strong regulatory role reserved for state officials.

©2018 Bloomberg L.P.