DOL Finalizes Regulations to Extend Small Business Access to Health Plans

The Department of Labor (DOL) has finalized regulations to expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health Plans, also known as Association Health Plans (AHPs).

According to a DOL announcement, many small business owners cannot afford to offer health insurance to their employees. The percentage of small businesses offering health care coverage has been dropping substantially. For the self-employed, the individual market exchanges do not offer affordable coverage either; premiums more than doubled between 2013 and 2017 with deductibles increasing even more.

“This reform allows small employers—many of whom are facing much higher premiums and fewer coverage options as a result of Obamacare—a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers,” the announcement says.

Under the DOL’s new rule, AHPs can serve employers in a city, county, state, or a multi-state metropolitan area, or a particular industry nationwide. Sole proprietors as well as their families will be permitted to join such plans. In addition to providing more choice, the new rule makes insurance more affordable for small businesses. Just like plans for large employers, these plans will be customizable to tailor benefit design to small businesses’ needs. These plans will also be able to reduce administrative costs and strengthen negotiating power with providers from larger risk pools and greater economies of scale.

The rule includes several safeguards. Consumer protections and healthcare anti-discrimination protections that apply to large businesses will also apply to AHPs organized under this rule. As it has for large company plans since 1974, the Department’s Employee Benefits Security Administration (EBSA) will monitor these new plans to ensure compliance with the law and protect consumers. Additionally, States will continue to share enforcement authority with the Federal Government.

The Congressional Budget Office (CBO) estimates that millions of people will switch their coverage to more affordable and more flexible AHP plans and save thousands of dollars in premiums. CBO also estimates that 400,000 previously uninsured people will gain coverage under AHPs.

More information about AHPs can be found on the DOL’s website.

A lawsuit coming

While some employer groups have applauded the regulation for helping more employees gain access to health care coverage, other groups have expressed fear that it will increase pricing on Affordable Care Act (ACA) market exchanges by taking a number of consumers out of the pool.

In a blog post, Mercer says, “This regulation opens a large door for associations, small employers and sole proprietors to access competitive health care benefits. Association Health Plans are arrangements where employers band together to purchase health coverage. By banding together, smaller employers can access benefits currently afforded only to large employers, like cost savings, reduced administrative complexity, and less regulatory burden.”

The Foundation for Government Accountability (FGA) says it commends the Trump administration for their commitment to lowering costs and increasing competition in the nation’s health insurance marketplace. “The rule thoughtfully addresses the needs of working owners, maintains rules for existing AHPs to prevent disruption, and seeks to ensure national associations have a clear path forward to operate,” it said in a statement.

However, New York Attorney General Barbara D. Underwood and Massachusetts Attorney General Maura Healey announced they would sue the Trump administration over the regulation. They released the following statement: “Yesterday’s announcement by the Trump Administration to dramatically expand the footprint of Association Health Plans will invite fraud, mismanagement, and deception—and, as we’ve made clear, will do nothing to help ease the real health care challenges facing Americans. We believe the rule, as proposed, is unlawful and would lead to fewer critical consumer health protections. We will sue to safeguard the protections under the Affordable Care Act and ensure that all families and small businesses have access to quality, affordable health care.”