The Trump administration on Tuesday finalized a rule expanding the availability of alternative insurance plans that do not meet the 2010 health care law’s requirements despite objections from consumer advocates and the industry.
The rule will extend so-called association health plans, which allow insurance companies to skirt benefit requirements and other parts of the 2010 law. President Donald Trump heralded the new rule in a speech Tuesday to the National Federation of Independent Business trade group, or NFIB.
“You’re going to save massive amounts of money and have much better health care. It’s going to cost you much less,” he said. “And it’s going to be, I think, fantastic.”
Trump also said the administration is working on an expansion of the rule to include “even larger groups.” The Department of Labor did not immediately respond to a request for comment.
Advocates of the rule say the plans offer an option to consumers who don’t qualify for federal subsidies, a group that has been hit hard by skyrocketing premiums on the exchanges created by the health care law.
The newly expanded association plans will not be allowed to charge more or deny coverage to people with pre-existing conditions. But the policies are not required to offer the law’s 10 essential health benefits. Critics maintain that will allow plans to exclude services that would attract sicker consumers.
Association plans also do not have to comply with the health care law’s limits on higher premiums based on age or gender. Senior officials said the plans will protect against age and gender discrimination but did not provide details. The new rule, they said, helps put small businesses on an “even playing field” with large employers.
“The regulatory burden on small businesses should certainly not be more than that on large companies,” Labor Secretary Alexander Acosta said on a call Tuesday with reporters.
The administration will start phasing in implementation of the rule on Sept. 1 and continue through 2019.
Watch: Trump Discusses Health Care Plans at ‘Right to Try’ Bill Signing
Expanding the plans
Association health plans allow businesses to band together in order to leverage more power in negotiating insurance rates. The new rule amends the definition of “commonality” under the Employee Retirement Income Security Act, or ERISA, to allow businesses in different industries located in the same geographic area to join forces for the purpose of buying insurance.
This includes metropolitan regions that span multiple states, which moves toward fulfilling Trump’s campaign promise to allow the purchase of insurance across state lines.
Employers were previously required to be similar businesses and be connected for a principle reason other than health insurance in order to qualify to offer an association health plan.
The rule also extends association plans to self-employed workers with no employees, another break from previous ERISA interpretation.
Few such plans exist today, and they have a history of fraud. The rule has consequently garnered most of its support from congressional Republicans such as Sen. Rand Paul of Kentucky and state farm bureaus that offer the plans. The NFIB, the U.S. Chamber of Commerce and the National Restaurant Association also support the plans.
“By banding together in an Association Health Plan, small restaurant owners from Nevada to North Carolina will now be able to purchase high quality insurance for a more affordable price.” National Restaurant Association CEO Dawn Sweeney said in a statement.
In part to combat a resurgence of fraud, the administration is requiring small businesses to have an additional business reason other than health insurance to form an association, although insurance may be the primary motive. The Department of Labor hopes this will undercut the number of bad actors attempting to game the system.
The Labor Department expects approximately 4 million people will sign up for the plans in the near future, including 400,000 uninsured people.
But the insurance industry, consumer groups and Democrats warn that association plans will further deteriorate the individual market by siphoning off healthy consumers.
“Let’s be clear — this policy has nothing to do with patients and everything to do with appealing to extreme Republican donors and special interests — and it has got to stop,” Washington Democratic Sen. Patty Murray said in a statement.
Multiple states raised the question of ambiguity between federal and state regulations, which is already a murky area under ERISA. A coalition of groups and stakeholders also filed an open records request for documents from the Centers for Medicare and Medicaid Services related to the plans’ history of fraud. But administration officials stressed that states would maintain current authority over the plans.
The rule is one of three stemming from Trump’s executive order last October to expand insurance opportunities outside of the health care law. Another rule to expand the length of short-term health plans from three months to one year is expected later this year.
A third proposal expanding the use of health reimbursement arrangements — which allow employers to use pre-tax dollars to pay for workers’ health expenses — has yet to be released.