The Labor Department this month proposed looser regulations on so-called association health plans, under which small businesses, professional associations and others in similar circumstances can band together and buy insurance coverage for their groups as though they were large employers. The department argues that up to 11 million people working at small businesses or as sole proprietors lack health insurance, and that the new rules would help provide them more options.
In fact, there is a potentially large downside. The rules would also excuse association health plans from covering 10 classes of essential health benefits. Plans would probably be cheaper, but they would likely cover less than the comprehensive ones Obamacare sought to make the national standard. It is likely that some people who buy these plans will develop significant health problems and find themselves disastrously under-covered. Some may be willing to take that risk. The bigger problem is that opening a new avenue to buying shoddier insurance may harm everyone else seeking affordable, comprehensive coverage when they cannot get it from a large employer.
Obamacare was built for these individual insurance buyers, who are guaranteed comprehensive coverage that includes those 10 essential health benefits if they buy in the Obamacare marketplace. Over time, new, cheaper association plans might draw healthy people out of the well-regulated Obamacare market and into the more loosely regulated world of association plans. The more healthy insurance buyers exit the Obamacare system, the higher premiums would have to rise in the system's marketplace to offset the medical costs of those who remain. Many people who need coverage — or who simply want comprehensive policies — would have to pay more for it.
The rules' defenders argue that association plans would not be allowed to discriminate against people based on their health status, so it would be hard for them to draw only healthy customers. But experts worry the rules may allow plans to discriminate heavily based on age and sex. Plans could also find subtle ways of weeding out sick customers, for example by designing benefits packages that do not cover expensive treatments that some customers need.
If these rules were the last the Trump administration were to issue, the protections that it retains might contain the damage. But there is another rule in the works that could be even worse, possibly allowing people to buy relatively unregulated health- insurance plans because they are "temporary" — but that in fact last 364 days of the year. This would drain lots of healthy people out of the Obamacare system, into skimpy insurance plans, leaving higher premiums behind them.
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