The Trump Administration has just proposed a new rule which seeks to expand the scope of Association Health Plans (AHPs), arrangements in which small businesses can pool together to get the purchasing clout of large employers to get a better deal on private insurance coverage. In principle, that is not a bad idea and in fact is the motivating spirit underlying the Affordable Care Act’s creation of the Small Business Health Options Program (SHOP) component of the health insurance exchanges. SHOP lets multiple small businesses buy insurance from the same plan at group rates in a competitive insurance market.
But SHOP came from Obamacare, so instead the Administration is weakening SHOP by limiting the SHOP system in federally facilitated states. And it is offering an inferior – and potentially dangerous – alternative that has been repeatedly proposed by conservatives and soundly rejected as a bad idea for more than a decade. Because of this, the insurance industry, including America’s Health Insurance Plans and the Blue Cross Blue Shield Association, and health organizations like the American Heart Association and the March of Dimes, have opposed this option.
The troubling difference is that AHPs could offer bare bones, unregulated insurance plans that would not be subject to the same insurance standards, such as the requirements to offer maternity, mental health or even prescription drug coverage, as other private health insurance and might include pre-existing condition exclusions that hurt those with chronic conditions. Thus, AHPs could undercut regular, comprehensive coverage by weakening insurance protections.
This leads to the risk that only younger, healthier people would select AHPs and older workers or those with more health problems who want better coverage, have to buy regular, more comprehensive insurance. This would force regular insurance premiums to spiral upward and would split up the market, making it less efficient and effective overall. Moreover, there is a well-known history that this type of health plans – also called multiple employer welfare arrangements (MEWAs) – has been plagued by fraud, excessive administrative costs and discrimination against individuals and firms with more health problems. This is why the insurance industry and health organizations have opposed AHPs.
The proposed regulation cautiously notes that expanding AHPs would actually also increase the federal deficit. Rather than expanding AHPs, the better option is to strengthen the SHOP system, The District of Columbia has a robust SHOP system that now covers over 75,000 employees in hundreds of small businesses (and in Congress) at very reasonable prices. DC’s system is so successful that Massachusetts is adopting DC’s system to operate its SHOP program and state employee health plans. Rather than increasing the deficit by expanding AHPs, it would be more efficient and effective to use those funds to strengthen the existing SHOP system to offer a better choice of comprehensive insurance plans for small businesses and their workers.
Leighton Ku, PhD, MPH, is a Professor and Director of the Center for Health Policy Research at the George Washington University’s Milken Institute School of Public Health. He is also an Executive Board member for the District of Columbia’s Health Benefit Exchange Authority.