Trump administration proposes new rule that would expand use of association health plans

Health insurance benefits form
A new rule from the Trump administration would allow sole proprietors to join association health plans. (Getty/michaelquirk)

Wasting little time at the start of the new year, the Trump administration has proposed its first rule resulting from the president’s executive order on healthcare.

The rule, released Thursday by the Department of Labor (DOL), addresses the executive order’s direction to expand the use of association health plans (AHPs). 

RELATED: Trump signs executive order that starts effort to unwind ACA

AHPs, through which small businesses can join associations based on professional, trade or interest groups, are not a new concept. But the regulations would change the rules about which type of groups and individuals can join them.

For one, employers would be allowed to form an AHP—and thus purchase insurance in the large-group market—on the basis of either industry or geography. For example, a health plan could serve employers in a state, city, county, or a multistate metro area, or it could serve all the businesses in a given industry nationwide, per a DOL press release

The new regulations would also allow sole proprietors to join AHPs, “clearing a path to access health insurance for the millions of uninsured Americans who are sole proprietors or the family of sole proprietors,” the department said. 

The idea is that by banding together to buy insurance, employers/sole proprietors can reduce administrative costs, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options. The executive order’s two other main concepts—expanding short-term health plans and health reimbursement arrangements—are also meant to achieve the goals of expanding insurance options and lowering costs.

But a coalition of the industry’s largest trade groups have warned that such actions could “create or expand alternative, parallel markets for health coverage,” which could result in higher premiums for consumers—especially those with pre-existing conditions. They urged state regulators to step in to protect consumers from the executive order—including creating policies that counteract new federal rules if necessary.

For its part, the DOL said AHPs cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors—suggesting they will keep two of the Affordable Care Act’s key consumer protections intact. 

In the past, though, AHPs have had other problems. Some have gone bankrupt, leaving consumers to foot unpaid medical bills, and others have run afoul of state regulators for falsely claiming they provided comprehensive coverage.