The Trump administration recently finalized a rule that will enable millions of Americans to join association health plans. AHPs allow small businesses and self-employed individuals in the same geographic area or industry to link up to purchase coverage. Such plans can be significantly cheaper than those sold through ObamaCare’s insurance exchanges.
Senate Minority Leader Chuck Schumer, D-N.Y., claims the rule will result in the proliferation of “junk health insurance.” This is little more than fearmongering. Sen. Schumer and his progressive colleagues are simply worried that affordable AHP coverage will prove popular by giving people new options for coverage — and expose ObamaCare as the cost-inflating mess it’s always been.
AHPs could permit, say, a collection of Uber and Lyft drivers, or dozens of auto body-repair shops, or a group of waiters and waitresses, to access the same insurance policies available to large companies. Under the banner of an AHP, small firms together form a larger risk pool. Such pools are less risky, in the aggregate, for insurers — and thus can lead to lower rates for all the members of an AHP.
Previously, there were stringent guidelines on who could form AHPs. Those restrictions forced most small businesses and self-employed individuals to purchase insurance in the small-group or individual markets.
Those markets are subject to ObamaCare’s costly mandates. For example, all plans must cover ten essential health benefits — like speech therapy and substance-abuse treatment — even though many Americans don’t want or need them.
Insurers must also charge all customers of the same age the same amount, regardless of their health status or history. So someone who is fit and trim pays the same as his neighbor who eats to excess and doesn’t exercise.
The large-group market, by contrast, is largely exempt from ObamaCare’s mandates.
Those mandates have forced insurers to raise individual and small-group premiums to astronomical levels. Many small firms haven’t been able to cope. From 2008 to 2015, the share of businesses with between 10 and 24 employees that provided insurance dropped from 66% to 49%.
Some businesses have had to cut staff and reduce workers’ hours. Between 2010 and 2015, the Affordable Care Act’s regulations led to the loss of almost 300,000 jobs and $4.7 billion in wages at businesses with 20 to 49 workers, according to the American Action Forum.
Meanwhile, in the individual market, where many people who are self-employed or work for firms that don’t provide insurance shop for coverage, average premiums more than doubled between 2013 and 2018. Insurers in several states are planning double-digit premium increases for 2019.
By expanding access to AHPs, the administration is offering an alternative to the never-ending rate hikes ObamaCare has foisted upon the individual and small-group markets. By 2022, AHP coverage could, on average, cost $9,700 less than individual-market plans and $2,900 less than small-group plans, according to consulting firm Avalere.
That’s in part because AHPs won’t have to cover the same extensive list of ten essential benefits as exchange policies. That makes them a good option for people who desire more modest plans.
Unsurprisingly, these cheaper policies are projected to be popular. The Congressional Budget Office estimates that four million more individuals will be covered by 2023 by AHPs once the new rule is fully implemented. The AHP rule, along with another Trump administration rule expanding access to short-term health plans for up to 346 days, will likely reduce the number of uninsured Americans by 1 million people each year.
That should be music to progressives’ ears — fewer uninsured and lower insurance costs. And just like conventional employer-sponsored insurance, AHPs can’t turn away people with pre-existing conditions or charge them more than their healthy peers.
Dems’ Dislike For AHPs
Yet Democrats are vociferous in their opposition to AHPs. Perhaps they’re afraid that Americans will dump exchange coverage in favor of AHPs — and thus shine a bright light on ObamaCare’s failures and false promises.
President Obama pledged in 2010, the year ObamaCare became law, that exchange plans would save the average family $2,500 a year. But premiums have more than doubled under ObamaCare. He said that the new online marketplaces would be efficient and easy to use. But enrollment has been difficult from the start, with a peak of about 12 million enrollees in 2017.
And he promised, “If you like the plan you have, you can keep it.” We all know how that turned out.
AHPs can offer millions of Americans relief from sky-high premiums. After five years of dealing with ObamaCare’s cost-inflating regulations, Americans could use some more affordable insurance choices.