The US Department of Labor has finalized a new regulation that will enable more small businesses and self-employed Americans to buy health insurance through association health plans (AHPs), which proponents say will help lower health insurance costs for smaller employers, but which critics say undercuts the essential coverage requirements created by the Affordable Care Act. The core impact of the nearly 200-page rule is to broaden the definition of the term “employer” under the Employee Retirement Income Security Act (ERISA), establishing new criteria under which employers can join together in an association that would still be regarded as a single “employer” for ERISA purposes. SHRM’s Stephen Miller discusses what that means for how small businesses buy group health insurance:
The broader interpretation of ERISA will let employers anywhere in the country that can pass a “commonality of interest” test join together to offer health care coverage to their employees. An association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:
- In the same trade, industry or profession throughout the United States.
- In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.
Sole proprietors will be able to join small business health plans to provide coverage for themselves as well as their spouses and children.
Previously existing AHPs, which were allowed under a more limited set of restrictions, will not be affected, unless they choose to expand in ways allowed by the new rule. The rule change, which President Donald Trump ordered the department to study last year, effectively exempts AHPs from ACA regulations that apply only to individual and small group plans by allowing them to operate in the more lightly regulated large group market. These regulations include the core package of health care services known as essential health benefits, which all plans in the individual and small group market are required to include but larger plans are not.
More changes may be in the pipeline as the Trump administration works to dismantle as much of the ACA’s regulatory structure as it can. Trump’s orders last October also called for easing restrictions on the purchase of short-term insurance policies that don’t have to follow the ACA’s strict coverage requirements, and allowing more organizations to give employers money to buy their own coverage through health reimbursement arrangements or HRAs. The administration proposed a rule on short-term limited-duration insurance in February, SHRM’s Miller notes, while a proposal to allow large employers to fund stand-alone HRAs is expected to come soon.
The new rule on AHPs may not do much to address the spiraling health care costs employers are bracing themselves for next year, after Congress failed to include measures to stabilize the health insurance marketplace in the omnibus spending package passed earlier this year. Experts tell Miller that the expansion of AHPs may lead even more healthy Americans to pull out of the individual and small group marketplace governed by the ACA’s essential coverage requirements, which could cause the prices of these ACA-compliant plans to rise further and hasten the collapse of that marketplace. While these changes mainly affect the individual and small group markets, large group health plan providers could face price hikes if insurance providers shift costs to them to balance out an increase in uncompensated care as Americans exit the individual market or opt for plans that provide less robust coverage.