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Labor Dept. Issues Final Rule on Association Health Plans

— Rule aimed at helping small businesses, but critics see many loopholes

MedpageToday

WASHINGTON -- The Trump Administration rolled out a on association health plans Tuesday -- a rule supporters say will allow more small businesses to access affordable health insurance, while critics charge that it will leave purchasers vulnerable to higher premiums and coverage denials.

"As the cost of insurance for small businesses has increased, the percentage of small businesses offering coverage has dropped substantially," Labor Secretary Alex Acosta said on a teleconference with reporters. "Today the Trump administration hopes to level the field by expanding access ... [This] will offer millions of American more affordable coverage options."

The idea behind association health plans (AHPs) is to allow small businesses to band together as associations -- organized either by geographic region or business type -- to purchase health insurance for their employees. Although a few such plans currently exist, they are subject to Affordable Care Act (ACA) regulations as well as restrictions on recruiting from across state lines.

"By providing scale and access to a large-group market, [small businesses will get] coverage at a better price," Acosta said. "This includes 400,000 Americans who are currently uninsured. [The] AHP [rule] will include safeguards, consumer protections and anti-discrimination protections" similar to those applied to large businesses.

But AHP critics disagree with the administration about their benefits. "AARP has long raised concerns with the lack of protections and benefits for consumers under AHPs, specifically since AHPs increase the fragmentation of risk pools, which drive up the costs for older Americans," said Nancy LeaMond, executive vice president of AARP, an organization for people ages 50 and older, in a May 16th letter to all 435 members of the House of Representatives opposing a bill to allow agricultural communities to form AHPs.

"Additionally, these plans are not required to adhere to the Affordable Care Act's consumer protections, specifically the 3:1 age rating requirement ... and the requirement to cover the essential health benefits."

Aides to Acosta assured reporters in a background briefing that many consumer protections will remain. "[Consumers] will be protected from preexisting condition [exclusions] just as they are in a large group market," and will also be protected from discrimination based on age and gender, a senior Labor Department official said during the briefing.

The American Cancer Society's Cancer Action Network that the final rule "allows an AHP that is formed on a geographic basis to exclude certain geographic areas from membership. These changes amount to discriminatory tactics and could have the same effect as considering someone's health history."

President Trump praised the plan during a speech here Tuesday to a meeting of the National Federation of Independent Business. "I'm proud to announce another truly historic step in our efforts to rescue Americans from ... the Obamacare nightmare," he said. "This is low-cost, great healthcare ... Alex [Acosta] and the Department of Labor are taking a major action ... to make it easier for small businesses to band together to negotiate lower prices for health insurance and escape some of Obamacare's most burdensome mandates through association health plans."

He urged meeting attendees to start forming their own association plans right away. "You're going to save massive amounts of money and have much better healthcare ... It's going to cost less and it's very, very comprehensive ... In fact, while you're in the room together, shake hands, form an association -- good luck."

"Insurance companies are so excited about this; it's going to be very competitive," Trump said, adding a little dig at that industry. "They made so much money off of Obamacare, folks ... Everyone hears about Obamacare being a disaster except for the insurance companies. They're going to have to give a little bit of that money back. Negotiate tough, please."

Trump pointed out that the association members will be able to form plans across state lines. However, a Department of Labor official said during the phone briefing that state regulations for health plans will still apply. "States have capacity to regulate in the state to the extent they previously have had," the official said.

But there will still be loopholes, critics say. "Since AHPs are not required to cover the [ACA]-mandated 10 essential health benefit categories, including prescription medications, nor do they have to cover certain classes of drugs -- such as those that treat mental illness, HIV, hepatitis, or cancer -- beneficiaries will be surprised that if a certain drug or service is not covered, they will be on the hook for those costs," I Am Essential, a coalition of patient groups and their families, said in an email.

"This final rule will invariably reduce patient access to healthcare [and] weaken the health insurance markets, leading to higher healthcare costs for all, higher premiums for those who stay in the marketplace, and high out-of-pocket costs for those who are covered by AHPs for unexpected medical needs."

The American Academy of Actuaries agreed that premiums could increase in 2019 as a result of such plans. The elimination by Congress of the ACA's individual mandate penalty "is expected to increase premiums as unsubsidized lower-cost healthy individuals will be more likely to forgo coverage," the academy said in an released this month. "This is especially likely if ... the availability of alternative coverage is increased, for instance through expanded short-term limited duration plans or association health plans."

The final rule will take effect in phases, with an effective date of Sept. 1, 2018, for all associations to establish a fully-insured AHP; Jan. 1, 2019 for existing associations that have already established an AHP and want to start up a self-funded plan; and April 1, 2019 for all other associations to establish a self-funded plan.