Critics warn the steps will further destabilize wobbly Obamacare markets by siphoning off younger and healthier customers. | Yuri Gripas/Getty Images Trump’s new health insurance rules expected to hurt Obamacare

Obamacare suffered another blow Tuesday when the Trump administration announced plans to make it easier for small businesses and trade groups to band together to purchase health coverage outside of the law’s insurance markets.

President Donald Trump touted the expansion of so-called association health plans, which offer fewer consumer protections than Obamacare coverage, as a much-needed cheaper alternative. But critics have warned that the latest move will further drive up Obamacare premiums and weaken the law.


“For the first time ever, sole proprietors will be able to buy lower-cost group insurance instead of getting ripped off by this disaster we all know as Obamacare,” Trump said during a speech at the National Federation of Independent Business, a group that has long opposed the 2010 Affordable Care Act.

Democrats decried the new rules as the latest act of Obamacare “sabotage” that will drive up health insurance premiums for millions in the law’s insurance markets. The Labor Department rules come after the administration earlier this month urged a federal court to throw out Obamacare’s popular insurance protections for pre-existing conditions, arguing they are no longer valid after the GOP tax law eliminated the individual mandate penalty for skipping health coverage. The administration will also soon finalize rules boosting short-term plans that typically offer much skimpier coverage than Obamacare.

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Critics warn the steps will further destabilize wobbly Obamacare markets by siphoning off younger and healthier customers, who are more likely to favor cheaper plans that cover less. The law’s insurance markets have already been beset by skyrocketing premiums and diminishing competition, problems that are likely to grow worse if the customer base becomes even smaller and sicker.

“These plans weaken protections for Americans with pre-existing conditions,” Senate Minority Leader Chuck Schumer said. “No single group that represents physicians, patients, hospitals or nurses is supportive. Not one."

Supporters of the Affordable Care Act also worry that the law’s consumer protections will be eroded under the new rules, since insurers will be allowed to offer skinnier coverage that doesn’t include costly benefits like mental health treatment and prescription drug coverage. Customers might not be aware of coverage gaps until they require significant medical care and could be left with big, unexpected bills.

Consumer advocates had called on the Trump administration to mandate that association plans cover the same broad set of benefits as Obamacare plans. However, the Labor Department rejected the suggestion, concluding that it would raise costs and restrict the coverage options available to small businesses and independent contractors.

Many business groups praised the new rules. The National Federation of Independent Business, which unsuccessfully sought to overturn Obamacare in the courts, is among the most ardent supporters of the new proposal.

“In the wake of the Senate’s failure to repeal Obamacare, we are grateful to President Trump for addressing regulations that make it harder and costlier for small business owners to provide healthcare for themselves and their employees,” NFIB CEO Juanita Duggan said in a statement.

Administration officials said the final proposal contains consumer protections, including prohibitions on discrimination against customers with expensive medical conditions. That could reassure critics but may limit the ability of the plans to hold down costs.

“I think that’s problematic,” said Chris Condeluci, a benefits lawyer who was a top Republican staffer on the Senate Finance Committee during Obamacare’s drafting. “It really sets up many of these [association plans] to fail.”

However, existing association health plans that don’t meet the new anti-discrimination requirements can continue operating under the old rules. Employers had raised concerns that some current plans would be forced to shut down if they weren’t granted an exemption.

The new regulations are likely to spark a legal challenge on the grounds that they violate federal labor law and need approval from Congress. Insurance regulators, particularly in states that have embraced Obamacare, are also likely to push back against the changes.

Insurers are proposing double-digit rate hikes for 2019 in many states, citing the likelihood some existing Obamacare customers will migrate to the Trump-backed health plans. The Society of Actuaries projected that the expanded availability of association health plans would reduce Obamacare enrollment by 2 to 6 percent. It also predicted that customers dropping out of the exchanges will be 60 to 70 percent healthier than those who remain.

Highmark Health CEO David Holmberg said the health insurer, which is finally making money on Obamacare customers after years of losses, is committed to remaining in the law’s markets in Delaware, Pennsylvania and West Virginia. However, he said the changes coming out of Washington are adding new challenges.

“We can see a path where we could stabilize this, but we continue to see rule changes,” Holmberg told POLITICO. “That creates a new set of uncertainties.”

Association health plans have been around for decades, allowing companies to join together to create larger pools of customers to get better insurance rates. The Trump administration, in a major change to how association health plans have operated, has proposed allowing self-employed individuals to enroll in them.

The change will help people in non-traditional work arrangements, Condeluci said.

“One of the purposes of the change for allowing self-employed individuals was a recognition of a growing gig economy,” he said.

