Buyer beware of association health plans

Business groups that have long advocated for association health plans (AHPs) just learned a valuable lesson: Beware of politicians bearing gifts.

Recently, the Trump administration finalized a U.S. Department of Labor rule that will allow groups of businesses to band together to buy insurance across state lines. President Trump claimed this rule would save small businesses “massive amounts of money” and lead to better health coverage for small firms.

Now that the rule is final, however, some longtime supporters of association health plans are disappointed.

{mosads}The National Federation of Independent Businesses (NFIB) said it won’t be making an AHP available to its more than 300,000 members, reportedly because it feels the plans would require too much financial investment for too little return.

Specifically, NFIB objects to the requirements that customers in a AHP must be in the same industry or reside in the same state under the new rule.

NFIB is not alone in passing on these plans. Another AHP advocate, the National Retail Federation, said it doesn’t expect to offer a plan due to the “structure of the rule,” while the National Association of Realtors suggested it, too, would not rush into starting an AHP even though it has been a strong supporter of the plans for years.

It’s encouraging that so many powerful groups recognize AHPs are not the solution they appear to be for the health-care needs of small businesses.

While the new rule may make it easier for a handful of small firms with younger and/or healthier employees to purchase association health plans that could be cheaper in other states, it will cause the insurance market for small businesses to split in two, with major spikes in premiums for small firms with older or sicker workers that must remain in the small-group market because they need more comprehensive coverage.

These multi-state plans will also offer fewer consumer safeguards. In fact, they will not have to include protections for people with pre-existing conditions, nor will they be required to cover things like maternity care because they will not be subject to certain rules established by the Affordable Care Act (ACA).

If those facts aren’t enough to raise alarms about AHPs, consider this: If someone covered by an association plan gets sick and needs expensive treatments, that individual could be dropped from the plan — or the entire plan could be voided.

What’s more, the AHP rule is redundant because small businesses are already allowed to work together to purchase health insurance. That system is called the small-group market, and the more people we have in this pool, the lower premiums will be for its participants.

Encouraging people to leave the small-group market, however, will only harm small businesses by raising their premiums.

The Trump administration’s health-care policies are consistently bad for small businesses, and AHPs are no exception. If AHPs ever become widely popular, small businesses will either be forced to buy plans that offer less comprehensive coverage or pay much more than they do now for higher-quality insurance.

If the Trump administration looked at the facts, it would see AHPs are not good policy, and I fear the only reason the administration is promoting them is to encourage as many people as possible to abandon the ACA marketplaces, which have been a tremendous help to small firms.

This is a reckless motivation for public policymaking, and it must stop for the good of America’s small businesses.

John Arensmeyer is the founder and CEO of Small Business Majority, which has a nationwide network of 58,000 small firms.