Millions of small business owners and their employees have a new option when it comes to affordable healthcare coverage. In late June, the Department of Labor issued its final rule on Association Health Plans (AHPs), which allows more employers to form AHPs. These plans will offer millions of America’s small business owners and their employees the opportunity to join together, by industry or geography, to purchase healthcare coverage as if they were single large employers. AHPs allow participants to strengthen their negotiating power and spread risk and cost over a larger pool of members.
When the Patient Protection and Affordable Care Act became law in 2010, small businesses employing over fifty people faced a significant tax penalty if they did not offer insurance to full-time employees. This provision, commonly referred to as the “employer mandate,” was included to encourage employers to continue providing healthcare insurance once the ACA’s health insurance exchanges opened. A 2013 poll conducted by Kaiser Health found that employers directly or indirectly covered about 44 percent of the population.
The employer mandate essentially forced many small businesses to purchase healthcare coverage in small-market insurance pools (which provided fewer options and higher costs), which lacked the economy of scale to negotiate lower prices in the large-market insurance pools. President Donald Trump’s Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” called for U.S. Secretary of Labor Alexander Acosta to consider allowing more employers to create AHPs. In following that directive, the DOL created the opportunity for participating small businesses to access large-market insurance pools. The Congressional Budget Office estimates that 400,000 previously uninsured people will obtain healthcare coverage under AHPs, and that over four million individuals will switch to coverage provided through AHPs.
“AHPs are about more choice, more access, and more coverage. The president’s decision helps working Americans – and their families – purchase quality, affordable health coverage,” said Secretary Acosta.
While in the past, some AHPs have been rife with abuse, mismanagement, and fraud, the DOL’s final rule includes important safeguards to protect consumers including many of the protections included in the ACA. AHPs will be monitored by the DOL’s Employee Benefits Security Administration to ensure they comply with the law, and states will also share enforcement authority with the federal government.
The final rule also expands coverage options for self-employed individuals. Those who employ others have always been able to join an AHP, and under the rule, self-employed individuals with no employees can now join an AHP along with their families, so hoteliers who are just starting out in the business now have the option to ensure that they and their families can access affordable healthcare coverage through an AHP.