The Trump administration issued a sweeping new rule on Tuesday to make it easier for small businesses to band together and set up health insurance plans that skirt many requirements of the Affordable Care Act, offering lower costs but also fewer benefits.
President Trump, speaking at a 75th anniversary celebration of the National Federation of Independent Business, said the new rule would allow small businesses to “escape some of Obamacare’s most burdensome mandates” by creating new entities known as association health plans.
“You’re going to save massive amounts of money and have much better health care,” Mr. Trump said to cheers from the audience of small-business owners. “It’s going to cost you much less.”
As a result, he said, “you’re going to save a fortune.”
Labor Secretary Alexander Acosta said the rule would give small businesses access to insurance options like those available to large companies, starting as soon as Sept. 1. Millions of people could benefit, he said.
“As the cost of insurance for small businesses has been increasing,” Mr. Acosta said, “the percentage of small businesses offering health care coverage has been dropping substantially. Today the Trump administration helps level the playing field between large companies and small businesses.”
The new entities would be exempt from many of the consumer-protection mandates in the Affordable Care Act. They may not have to provide certain “essential health benefits” like mental health care, emergency services, maternity and newborn care, and prescription drugs.
Labor Department officials said that association health plans would not be able to deny coverage or charge higher rates to individual employees with pre-existing medical conditions.
Still, consumer groups and many state officials have opposed the push for association health plans. They say the new plans will draw healthy people out of the Affordable Care Act marketplace, driving up costs for those who need comprehensive insurance.
Senator Chuck Schumer of New York, the Democratic leader, said on Tuesday that the new rule would open the door to “junk health insurance.” It is, he said, “the latest act of sabotage of our health care system by the Trump administration.”
Trump administration officials said premiums were already soaring because of flaws inherent in the Affordable Care Act, President Barack Obama’s signature domestic achievement.
The new final rule carries out an executive order signed by Mr. Trump on Oct. 12.
The rule will allow small-business owners, their employees, sole proprietors and other self-employed people to join together to buy or provide insurance in the large-group market through association health plans.
Because they will be exempt from many requirements of the 2010 health law, Mr. Trump has said, the association health plans can “provide more affordable health insurance options to many Americans, including hourly wage earners, farmers, and the employees of small businesses and entrepreneurs that fuel economic growth.”
The new health plans might, for example, appeal to restaurant workers, real estate agents, dry cleaners, florists, plumbers and painters, officials said.
Under the rule, Mr. Acosta said, “business associations from city chambers of commerce to nationwide industry groups can offer health care insurance to the employees of their employer members through the large-group market.”
Trump administration officials said that small businesses and self-employed people in the same industry, state or region could band together and obtain health coverage as if they were a single large employer — even if they had no other connections to one another.
Until now, the Labor Department has required a much greater “commonality of interest” among small businesses that wanted to be treated as a large group when buying insurance. To qualify under prior rules, small businesses generally had to have some purpose “unrelated to the provision of benefits.” And the government often looked at the size of each company, rather than the group as a whole, to determine if it was a large or small employer.
The new rule takes a step toward fulfilling Mr. Trump’s campaign promise to make it easier for companies to sell insurance across state lines.
“For the first time ever,” Mr. Trump said on Tuesday, “sole proprietors will be able to come together and buy lower-cost group insurance instead of getting ripped off by this disaster that we all know as Obamacare. These actions will result in very low prices, much more choice, much more freedom, including in many cases new opportunities to purchase health insurance. You’ll be able to do this across state lines.”
Critics said the new plans would cost less because they would provide fewer benefits.
Republicans in Congress have been trying for two decades to promote association health plans through legislation. Now the Trump administration is using its regulatory authority to accomplish what Congress could not.
Trade groups like the National Restaurant Association, the National Retail Federation and the National Federation of Independent Business have supported association health plans and could potentially sponsor them.
But consumer groups, state officials and Blue Cross Blue Shield plans have expressed concern. They say association health plans will tend to attract employers with younger, healthier workers, leaving behind sicker people in more comprehensive, more expensive plans that fully comply with the Affordable Care Act.
People with serious illnesses like cancer could face “ever-increasing premiums for comprehensive coverage,” said Chris Hansen, the president of the lobbying arm of the American Cancer Society.
Similar small-business health plans have a history of fraud and abuse that have left employers and employees with hundreds of millions in unpaid medical bills. The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials.
In past years, the Labor Department said, it has identified many “unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.”
The Coalition Against Insurance Fraud, representing insurers, consumer groups and law enforcement officials, met with Trump administration officials last month and emphasized the need for states to have a strong role in combating possible fraud by association health plans.
“Tens of thousands of innocent consumers and small businesses were victimized by a surge of fake health insurance plans that swept across the country in the early 2000s,” James Quiggle, a spokesman for the coalition, said on Tuesday. “We have to avoid a repeat of that sorry history.”
In another move this summer, Mr. Trump is expected to issue a final rule expanding access to “short-term, limited-duration” insurance, allowing such policies to run for 364 days, instead of the current limit of three months.
These plans — originally intended for people between jobs — are cheaper than comprehensive insurance, provide fewer benefits and would also be exempt from many requirements of the Affordable Care Act.