Millions of Americans could soon enjoy lower health insurance premiums, thanks to a new Trump administration rule.
The rule, which was proposed in January and will likely be finalized by early summer, would make it easier for self-employed individuals and small businesses to band together and purchase coverage through association health plans.
AHPs offer small businesses and sole proprietors an alternative to overpriced plans sold through the Obamacare exchanges. In 2018, average individual premiums on the healthcare.gov exchanges were nearly twice as high ($444 per month) as average individual-market premiums in 2013, the year before most of Obamacare took effect.
Premiums for small-group plans have also skyrocketed. This year, the price of plans in Connecticut jumped an average of 25 percent compared to 2017. Small businesses in Minnesota experienced increases of up to 23 percent.
These hikes explain why many small businesses don’t extend health benefits to employees. Less than one in three employers with 50 or fewer workers currently offers coverage.
President Trump’s AHP proposal could make it less expensive for small-business owners and self-employed Americans to obtain health insurance. In effect, the rule gives these people access to the coverage enjoyed by large businesses.
Historically, premiums for large employer plans have increased at a far slower rate than individual and small-group market premiums. Among companies with at least 1,000 workers, average premiums for an individual plan rose by less than 6 percent between 2014 and 2016.
The reason? Larger companies have more bargaining power to negotiate lower rates with insurers and providers. These companies also aren’t subject to some of Obamacare’s most expensive 10 essential health benefit mandates.
AHPs would level the playing field. Right now, a 20-person construction company has little to no leverage to negotiate favorable rates. But if a dozen small construction firms formed an AHP, they could negotiate better deals and keep costs low.
AHPs give small-businesses and self-employed Americans an affordable alternative to Obamacare-compliant coverage. The reform can’t come soon enough.