Lower costs, fewer benefits in new health insurance option

The Trump administration Tuesday rolled out a health insurance option for small businesses and self-employed people that could lead to lower premiums but may also cover fewer benefits than current plans.

Labor Secretary Alex Acosta said the new “association health plans” will allow small businesses to pool their purchasing power, gaining access to some of the advantages that large employers have in the health insurance market.

“Today the Trump administration helps level the playing field between large companies and small businesses,” Acosta said. “This expansion will offer millions of Americans more affordable health care options.”

The new plans would retain the same protections for people with pre-existing conditions, older workers, and women, that large company plans now have, Acosta said. However, some groups currently offer association plans, and it was unclear if the consumer protections also apply to existing plans.

A Labor Department summary said new association plans could be offered to employers in a city, county, state or a metro area that includes several states. However, plans within a particular industry can be marketed nationwide. Sole proprietors and their families could join an association plan.

President Donald Trump has long asserted that promoting the sale of health insurance across state lines could bring down premiums without sacrificing quality. But many experts aren’t convinced, because medical costs vary greatly according to geography.

Currently plans for small businesses are required to cover the Affordable Care Act’s 10 categories of “essential” benefits, from prescription drugs to maternity and mental health. Under the new approach, small employers could get coverage that comes with fewer required benefits, said Gary Claxton of the nonpartisan Kaiser Family Foundation.

Ultimately, the idea’s success depends on buy-in from plan sponsors, consumers, insurers and state regulators. No major consequences are expected for people covered by large employers.

Acosta cited enrollment estimates that predict a modest impact: about 4 million people covered by the plans within a few years, including 400,000 who would have been uninsured. Compare that to the total number of about 160 million covered by job-based insurance.

After Republicans hit a dead end trying to repeal the Affordable Care Act, the Trump administration has pushed regulatory actions to loosen requirements and try to lower premiums for individuals and small businesses.

Another major initiative is expected later this summer when the administration eases rules for short-term health plans lasting less than a full year that could be purchased by individuals. Those plans wouldn’t have to cover people with pre-existing conditions, but would offer healthy people much lower premiums.

Critics say the administration’s approach will draw healthy people away from the health law’s insurance markets, raising the cost of coverage, which is subsidized by taxpayers.

About 11 million people are covered by HealthCare.gov and state markets, but the administration’s priority is to try to lower premiums for another 7 million or so who buy their coverage directly and don’t get any help from the government.

State insurance regulators have been concerned about association health plans because similar plans in the past had problems with financial solvency and fraud. Administration officials said Tuesday that states and the federal government would share regulatory oversight of the plans, with states retaining their current authority.

The new plans will be phased in, starting in September.

A small business group called Job Creators Network welcomed the Trump administration move. Group president Alfredo Ortiz said it “will create more options, more competition, and lower costs for Main Street small businesses.”