Trump Administration Proposes Rules for Association Health Plans

The Trump administration proposed new rules on Thursday to make it easier for small businesses and individuals to buy a type of health plan long favored by conservatives that could bypass some of the insurance protections built into the Affordable Care Act.

The proposal, issued by the Labor Department, would carry out the most significant part of an executive order that President Trump signed in October, directing the government to foster alternative types of insurance. Proponents say the association health plans would be less expensive and enhance consumer choice, while critics — including the insurance industry — fear they would promote substandard coverage and weaken the ACA’s already fragile insurance marketplaces.

Specifically, the rules would allow such health plans to be reclassified so they no longer would have to include a set of 10 essential health benefits — including maternity care, prescription drugs and mental health services — that the ACA requires of insurance sold to individuals and small companies.

Through this and other changes, the administration essentially is attempting via executive powers something that congressional Republicans have tried and failed to write into law for the past quarter-century. Some health-law experts on Thursday questioned whether the draft regulation is an overreach that, if it becomes final, could be vulnerable to court challenges.

The Labor Department predicted that up to 11 million uninsured Americans who work for small businesses or are self-employed could benefit from the expansion of association health plans.

Such plans have existed for several decades under limited circumstances in which small businesses band together to buy insurance. Just 6 percent of relatively small U.S. companies used this approach last year, according to the Kaiser Family Foundation.

The administration’s proposal would expand the availability of association health plans in a variety of ways. For the first time, it would allow individuals to buy them. It also would broaden the circumstances under which association health plans could be created, eliminating a long-standing requirement that any association must already have existed for a purpose unrelated to health insurance.

The proposal would preserve the ACA’s rule that bars insurers from charging certain customers more based on their health status or from refusing to cover those with conditions that are expensive to treat. Insurers had feared that dropping this prohibition would be particularly damaging to the ACA’s marketplaces because it might encourage healthier people to turn toward these alternative plans while leaving the marketplaces with expensive coverage purchased by people who are sick.

However, unlike those marketplace plans, the association plans could charge customers different prices depending on their age, gender and location. “The potential is that it creates an uneven playing field,” said Kevin Lucia, a research professor at Georgetown University’s Center on Health Insurance Reforms, who worked on early stages of the 2010 health-care law within the Obama administration.

The draft rules make clear that association health plans may be sold across state lines. They do not go as far as some conservatives have wanted — freeing the plans from state regulation. Instead, the rules invite public input “about the relative merits of possible exemption.”

State regulation of association health plans and related insurance called multi-employer welfare arrangements are a significant issue because both have a long history of fraud and insolvency, sometimes stranding patients. Congress first directed in the early 1980s that states have a role in their regulation. One industry official, who was not authorized to speak on the record, said of the administration’s new proposal: “It’s very hazy how anything would be enforced.”

Sen. Rand Paul (R-Ky.), who has championed association health plans and stood with Trump in October when the president signed the executive order, praised the draft rule. “I applaud the administration for its action today . . . Conservative health care reform is alive and well.”

But William Schiffbauer, a longtime Washington attorney specializing in health insurance and employee benefits, predicted legal challenges, including from state regulators. He said congressional Republicans have always understood that a change in law is needed to promote association health plans. And in stretching the definition of an employer to encompass association health plans, the administration is deviating from the terms of a seminal 1974 health insurance law and agency interpretations down through the years, he added.

The rules, made available on the Office of Management and Budget website Thursday morning, are open to 60 days of public comment starting Friday. They do not address a second change that was part of Trump’s executive order — an expansion of the use of skimpy, short-term insurance that has been meant as a bridge for consumers between jobs.

In their 83-page proposal, Labor officials write that they considered “the potential susceptibilities” that health customers flocking to alternative health plans would create for the ACA marketplaces. They reasoned that “the ACA’s requirement that essentially all individuals acquire coverage and the provision of subsidies in exchanges” would blunt the effect.

A footnote mentions that the GOP tax bill Trump signed into law shortly before Christmas will end enforcement of the law’s individual insurance mandate next year.

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