The Trump administration issued new rules on Tuesday that will help small businesses and self-employed people get health insurance that costs less because it includes fewer benefits and consumer protections, bypassing significant requirements of the Affordable Care Act.
The rules, throwing the doors wide open to a type of insurance known as association health plans, accomplish through executive power what congressional Republicans have tried and failed to write into law over the past two decades.
Announced Tuesday morning by Labor Secretary Alexander Acosta, the final rules expanding access to such health plans come eight months after President Trump directed the government to foster alternatives to the ACA’s insurance provisions and five months after the Labor Department proposed a draft version.
They are the most recent piece in the administration’s jigsaw efforts to undercut elements of the ACA through its own powers after the Republican-led Congress failed last year to repeal a broad swath of the sprawling 2010 statute.
Acosta’s central talking point in the announcement was that the expansion of these plans will “level the playing field” between health insurance rules that apply to large companies and ones that pertain to small businesses.
The new rules allow plans to exclude coverage for maternity care, prescription drugs, mental-health services and other “essential health benefits” the ACA requires of coverage sold to individuals and small businesses. Acosta emphasized that the rules keep the same “consumer protection and health-care anti-discrimination that currently apply to large companies.”
In midday remarks before the National Federation of Independent Business, which supports the changes, Trump spoke in his trademark hyperbole, saying, “You are going to save massive amounts of money and have much better health care. It’s going to be fantastic. . . . You are going to save a fortune.”
Congressional Democrats and critics across the health-care industry say the availability of cheaper, skimpier coverage will leave some patients stranded when they get sick.
“Finalizing this rule is simply the latest act of sabotage of our health care system by the Trump administration and a back door to expanding junk insurance plans,” Senate Minority Leader Charles E. Schumer (D-N.Y.) said in a statement — part of a flurry of denunciations from Democrats and other opponents.
Critics also predict that a proliferation of these plans will splinter the insurance market, siphoning off healthy customers and making ACA exchanges more fragile and costly as they are left with a concentration of customers who are sicker and more expensive to treat.
Under the regulation, to be phased in for coverage sold from September to April, the association health plans may not charge more or refuse to cover customers with preexisting medical conditions, even though the administration argued in a legal case this month that those protections will soon become unconstitutional.
But the plans will have more freedom to charge different prices depending on customers’ ages, genders and locations — something ACA coverage cannot do.
Association health plans have existed for decades under limited circumstances of small businesses banding together to buy insurance. The plans have not been widespread. They and related ones called multi-employer welfare arrangements have over the years been found to commit fraud and sometimes have become insolvent.
The new rules substantially expand the circumstances under which association health plans can be created and purchased. The regulations erase a requirement that any association must already have existed for a purpose unrelated to health insurance. And for the first time, individuals will be able to buy one of the plans.
Plans may be sold nationally, in groups of states or a single state, according to senior Labor Department officials who briefed reporters on the condition of anonymity. States will continue to regulate them, although administration officials had asked for suggestions on how to exempt them from state regulation.
Acosta said government forecasts estimate the rules will lead 4 million Americans to be covered through association health plans, including 400,000 who are now uninsured.
During a comment period after the proposal came out in January, Labor received hundreds of comments, the vast majority opposed to the new rules.
Avalere Health, a Washington-based consulting firm, estimated last winter that the rules would lead to lower premiums by 2022 for those with association health plans — averaging $2,900 a year less than in the ACA marketplace for small businesses and $9,700 less compared with the individual market. On the other hand, the analysis showed, the rules would drive up premiums in the individual marketplaces by 3.5 percent, prompting 130,000 more people to become uninsured within five years.
On Tuesday, Dawn Sweeney, president of the National Restaurant Association, which has long pressed for broader access to association health plans, said, “Small restaurant owners from Nevada to North Carolina will now be able to purchase high-quality insurance for a more affordable price.”
In addition, the administration is working to expand a second form of insurance that also sidesteps ACA rules. These “short-term, limited duration health plans” were originally intended as a bridge for people between jobs or other temporary circumstances. The Obama administration restricted them to three months. Trump health officials are finalizing rules that would allow them to be sold for 12 months at a time.