Trump’s ObamaCare Lifeboat
The Trump Administration is on a mission to rescue health-care markets and consumers from ObamaCare’s shrinking choices and higher prices. Witness the Labor Department’s proposal to allow small businesses to band together to provide insurance on equal footing with corporations and unions.
The share of workers at small businesses with employer-sponsored health benefits has dropped by a quarter since 2010 as insurance costs have ballooned in part due to government mandates. About 11 million workers employed by small businesses are uninsured. Some businesses have dropped their workers onto state insurance exchanges where premiums are subsidized by taxpayers.
Enter President Trump, who last fall directed Labor Secretary Alexander Acosta to consider “expanding the conditions that satisfy the commonality-of-interest requirements” for association health plans under the Employee Retirement Income Security Act, or Erisa.
Large-group plans that are self-insured—i.e., funded by unions or employers—are covered by Erisa. These plans are exempt from ObamaCare’s essential benefits requirements, though they must comply with rules on annual and lifetime limits and pre-existing conditions as well as state solvency regulations.
Mom-and-pop businesses and sole proprietors aren’t so lucky. Most purchase coverage from insurers in the small group or individual marketplaces, which are subject to ObamaCare’s coverage mandates and controls on premium prices. The Obama Administration precluded small employers from forming association plans that are exempt from Erisa by narrowly interpreting the “commonality of interest” membership requirements.
But on Thursday Mr. Acosta proposed a new rule-making that would broadly define “commonality of interest” among employers to include geographical area—say, a metropolitan area or state—as well as an industry, trade or profession. Local chambers of commerce and national industry groups could thus sponsor plans. The rule would also treat sole proprietors as both employers and employees, which would allow independent contractors—e.g., Uber drivers or freelance journalists—to form or join association plans.
Liberals are howling that President Trump is trying to destroy ObamaCare exchanges. But millions of small business workers and proprietors are uninsured because they can’t afford coverage on the exchanges. Many sole proprietors who earn too much to qualify for subsidies have been squeezed by soaring premiums.
Association plans could reduce costs by spreading administrative burdens and actuarial risks over more workers. The exemption from ObamaCare’s benefit mandates would also give groups more flexibility to design plans to meet worker needs. Young restaurant workers might be able to purchase less expensive plans. Small businesses would also have more leverage to negotiate lower prices with drug companies and providers.
Workers couldn’t be denied coverage or charged more because of their health status, which will limit the flexibility and potential costs reductions in association plans. Such plans would also still have to comply with state regulations, which might limit their growth. But states could facilitate their expansion with reciprocity agreements that would allow, say, Wisconsin to recognize any association plan approved by Michigan or Indiana.
As new alternatives develop, the state exchanges may evolve into high-risk pools for the individuals hardest to insure. These might be less expensive for taxpayers to subsidize than the status quo that raises premiums for everyone. Workers in counties where only one or two insurers offer plans on the exchanges would have more options. Insurance companies would face more competition, which could reduce costs.
The Trump Administration can’t fix all of ObamaCare’s problems with deregulation, but it can at least provide some struggling Americans with lifeboats such as association health plans.