Originally published January 5, 2018 at 01:57a.m., updated January 5, 2018 at 01:57a.m.
WASHINGTON -- President Donald Trump's administration on Thursday proposed new rules that could make it easier for small businesses to band together and create health insurance plans that would be exempt from many of the consumer protections mandated by the Patient Protection and Affordable Care Act.
As many as 11 million Americans "could find coverage under this proposal," the Labor Department said in issuing the proposed rules, which carry out an executive order signed by Trump on Oct. 12. The public will have 60 days to comment on the proposal before the administration adopts final rules with the force of law.
The proposal would allow small-business owners, their employees, sole proprietors and other self-employed individuals to join together as a single group to buy insurance in the large-group market. The new health plans could be exempt from some requirements of the health care law. They would, for example, not have to provide certain "essential health benefits" like mental-health care, emergency services, maternity and newborn care, and prescription drugs.
"By joining together," the Labor Department said, "employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure and offer a wider array of insurance options."
But consumer groups, state officials, and Blue Cross and Blue Shield plans have strenuously opposed similar ideas for years. Association health plans, they say, will tend to attract employers with younger, healthier workers, leaving behind sicker people in more comprehensive, more expensive plans that fully comply with the health care law. That could drive up premiums that have risen steadily as Republicans have taken aim at President Barack Obama's signature domestic achievement.
Similar plans also have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills.
"Those with serious health conditions like cancer would be left paying ever-increasing premiums for comprehensive coverage," Chris Hansen, president of the American Cancer Society Cancer Action Network, said in a statement. "The rule proposed today will almost certainly result in more people facing financial distress when an unexpected health crisis happens."
Republicans in Congress have been trying for two decades to promote association health plans through legislation. The House passed a bill that included such plans in 1998, but it died in the Senate. President George W. Bush proposed them in 2003 and 2004. The House passed a bill to encourage them last March. And Sen. Rand Paul, R-Ky., has championed a similar bill in the Senate.
Now the Trump administration says it will use its regulatory authority to accomplish what Congress could not achieve by legislation.
The proposal offers a new interpretation of "employer" and other terms in the Employee Retirement Income Security Act of 1974, the framework for employer-sponsored health plans covering tens of millions of Americans.
Trump had ordered the Labor Department to develop the rules as a way to provide cheaper insurance options for consumers and small businesses, options that he said would cost less because they would be "exempt from the onerous and expensive insurance mandates" in the 2010 health law.
Paul praised the proposed rules Thursday, saying they would "allow more Americans to join in groups to purchase lower-cost health insurance across state lines."
In an apparent answer to critics, the Trump administration said its proposal included some protections for consumers: "Small business health plans (association health plans) cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors."
The proposed rules would expand the types of groups that could form association health plans and would allow for membership across state lines. Employers around the country could, for example, band together if they were in "the same trade, industry, line of business or profession" but had no other connections to one another. Likewise, employers in the same state, region or metropolitan area could form a group health plan.
For many years, the Labor Department has required a much greater "commonality of interest" among small businesses that wanted to be treated as a large group when buying insurance.
To qualify under current rules, small businesses generally must have some purpose and relationship "unrelated to the provision of benefits."
William Schiffbauer, a lawyer who specializes in insurance and employee benefits, said Thursday that the proposed rules would "overturn years of advisory opinions from the Labor Department." If the agency adopts this proposal as a final rule, he said, "it will very likely be challenged in the federal courts, delaying implementation" and shifting attention back to Congress.
The Labor Department said its new interpretation of the 1974 law, known as ERISA, was justified by "the need to expand access to health care and to respond to statutory changes and changing market dynamics."
The health care law and other laws have created "a complex and costly compliance environment for coverages provided through associations," the Labor Department said.
The proposed rules would make new insurance options available to "the millions of uninsured Americans who are sole proprietors or the family of sole proprietors," the department said.
When he signed the executive order calling for the new rules in October, Trump said they would provide millions of Americans with relief from "the disaster of 'Obamacare.'"
In an interview last week with The New York Times, Trump suggested that the new rules and policy had already been put into effect, but that is not the case.
"We've created associations, millions of people are joining associations," Trump said in the interview. "Millions. That were formerly in Obamacare or didn't have insurance. Or didn't have health care. Millions of people."
The Labor Department acknowledged that association health plans and similar entities had a history of abuse. Some of these health plans, it said, "have failed to pay promised health benefits to sick and injured workers while diverting, to the pockets of fraudsters, employer and employee contributions from their intended purpose of funding benefits."
The department said it now has the authority to prevent a repetition of such abuses.
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