Trump rolls out rule for cheaper small business health insurance. Here’s what’s missing

Ken Alltucker | USA TODAY

The Trump administration rolled out a rule that will allow small businesses and self-employed workers the option to buy less-expensive health insurance plans that can jettison benefits required by the Affordable Care Act.

The "association health plan" rule allows small businesses and sole proprietors to band together and buy coverage that's less expensive than existing options, Trump administration officials said.

"This expansion of association health plans will offer millions of Americans more affordable health-care options," Labor Secretary Alexander Acosta said in a morning call with reporters announcing the new rule that took effect Tuesday.

Acosta cited a Congressional Budget Office report that predicted these plans would enroll 4 million people over the coming years, including 400,000 people who were previously uninsured.

The new plans won't need to abide by Affordable Care Act requirements that mandate insurers offer a group of 10 essential benefits, and consumer groups warn these plans could skip coverage for expensive areas such as mental health, emergency and maternity care.

Others warn that healthy people may leave existing coverage for these new less-expensive plans. It could leave individual and small-group exchanges with a higher mix of people with chronic health problems. That could exacerbate rate increases for people who buy their own coverage from the Affordable Care Act marketplace.

Avalere Health, a Washington D.C.-based consulting firm, predicted 4.3 million people would leave the individual and small-group markets, which would increase premiums as much as 4 percent by 2022. Avalere performed the analysis for America's Health Insurance Plans, the lobbying group for the health insurance industry.

The new rule will allow employers in a city, county or state to join together under a plan, such as one offered by a local chamber of commerce. It would also allow employers and self-employed individuals in the same industry to join a nationwide plan.

Acosta said the changes are designed to "level the playing field" for small businesses by allowing them to offer insurance plans that are more comparable to those offered by large businesses. Larger firms typically spread the risk across a big pool of insured individuals, which allows them to offer more affordable protection against more dramatic price changes.

Groups such as the U.S. Chamber of Commerce and the National Restaurant Association praised the expansion of these plans.

“By banding together in an association health plan, small restaurant owners from Nevada to North Carolina will now be able to purchase high quality insurance for a more affordable price,” Dawn Sweeney, president of the National Restaurant Association, said in a statement.

But consumer groups said the new plans could fool individuals who believe they are purchasing more comprehensive coverage.

"We expect this new federal law will spark a rise in both insurers refusing to pay medical bills and medical bankruptcies," said Frederick Isasi, director of Families USA, a Washington D.C.-based group.

Isasi predicted the new rule will "pave the way for unscrupulous insurance companies" that target small businesses and self-employed individuals with plans that won't cover medical claims.

A Trump administration official said that association plans must file annual reports with the Labor Department and will be subject to regulatory oversight from state insurance departments.

In addition to freeing up rules for association plans, the Trump administration is expected to expand the use of short-term plans that are typically less expensive but don't come with existing health law protections. For example, unlike Affordable Care Act marketplace plans, short-term plans can exclude coverage based on an existing medical condition.

Current law restricts short-term plans to 90-day terms, but the Trump administration is expected to allow these plans to last 364 days.

Earlier this month, the Trump administration said that it no longer will defend a challenge filed by 20 states because it agrees that the health law's individual mandate and provision protecting those with existing medical conditions are invalid.