DOL Publishes Proposed Small Business Health Plan Rule

JANUARY 11, 2018

The Department of Labor (DOL) published a Proposed Rule last week, seeking to expand the availability of employer-based health care by reducing the mandates of what those insurance products must contain for small businesses and by creating health insurance plans that would be exempt from many of the Affordable Care Act (ACA) mandates.

DOL’s proposal would allow small businesses, sole proprietors and other self-employed people to join together to form groups across state lines and purchase insurance in the market, reducing costs through risk sharing amongst a larger group. ILMA has advocated for health plans that could be purchased across state lines.

The proposed rule also would reduce the requirements of what must be contained in a new health plan. Under the ACA, every insurance plan must offer ten essential benefits including those for addiction and mental health, prescription drugs, and maternity care. Advocates of the proposed rule believe that reduced requirements will allow employers to craft plans that are narrower in scope, which should lower the cost and incentivize their creation. 

Senate Health, Education, Labor & Pensions (HELP) Lamar Alexander (R-TN) stated after the proposal was released, “The rule would give these individuals and small business employees the same sort of lower cost insurance opportunities that the 178 million Americans have who buy insurance through their employers. These policies will also have the same sort of consumer protections that employees of large companies have such as protections against being charged higher premiums for having a pre-existing condition.”

The Trump administration claims, “By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure and offer a wider array of insurance options.”

Critics of the proposed rule suggest that it allows associations to market “junk plans” that do not provide adequate coverage. Acting Pennsylvania Insurance Commissioner Jessica Altman, said, “Association health plans are not subject to state patient protections like coverage requirements, grievance procedures and financial solvency requirements. Interstate insurance sales prevent state regulators from protecting consumers who purchase a plan sold in a different state.”

Additionally, there is some concern that the association plans will undercut the ACA insurance market by giving younger and healthier individuals the ability to purchase coverage through one of the association plans, driving up costs by only leaving the sickest and most costly in ACA risk pools.