Department of Labor Rule Would Allow Small Business Health Plans

On June 19, the U.S. Department of Labor (“DOL”) published a final rule on association health plans, which relaxes the requirements for small businesses and the self-employed to join together in creating healthcare plans capable of sidestepping certain requirements of the Affordable Care Act (“ACA”).  In a move that has been largely lauded by Republicans and criticized by Democrats, the Trump Administration cites the new final rule as working towards fulfilling a campaign pledge of lowering insurance costs.

In stressing what was ultimately the main purpose of the ACA, U.S. Secretary of Labor Alexander Acosta, citing a May 2018 report by the Congressional Budget Office, said that in expanding who is eligible to create an association health plan, DOL estimates that an additional 4 million Americans will be insured by an association health plan under this new final rule by 2023, of which approximately 400,000 are currently uninsured. The new final rule will also make it easier for association health plans to provide insurance to employers across state lines and provide employers with more choices, working to make coverage more affordable. It is further worth noting that an important aspect of association health plans is that they do not need to comply with many current insurance regulations, including the requirement that plans cover specified “essential” health benefits, such as prescription drugs and maternity care.

The stated purpose behind the new final rule is to make it easier for small businesses and the self-employed to band together to negotiate prices for insurance coverage while also allowing those groups to “escape some of Obamacare’s most burdensome mandates,” President Trump stated at the National Federation of Independent Businesses’ 75th Anniversary luncheon. The rule follows an October 2017 executive order directing DOL to allow a greater segment of employers to form association health plans and to therefore further expand healthcare coverage.

Those who have come out against the new final rule argue that even if more Americans who are currently uninsured obtain coverage under association health plans, the withdrawal of so many consumers from the individual health insurance marketplaces will drive up premiums for other Americans and increase the number of people who are uninsured overall. The same CBO report noted above indeed found that the expansion of association health plans would ultimately result in up to 6 million more uninsured by 2023. Critics also note that because these plans are not required to offer a level minimum of benefits, they could leave many insured individuals without adequate coverage for basic health care costs.

As the final rule takes effect and association health plans adapt to these new rules, it will be interesting to see which stance on the final rule turns out to be more accurate. If you have any questions or concerns about how this new final rule may affect you or your business, consult a healthcare attorney experienced in dealing with health insurance regulations.