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Experts, Industry Push Back on Health Insurance Proposal

Trump administation wants to loosen ERISA regulations

Sen. Lamar Alexander, chairman of the Senate Health Education, Labor and Pensions Committee, said a proposed rule change would help Americans who don’t have access employee-sponsored health insurance. (Tom Williams/CQ Roll Call file photo)
Sen. Lamar Alexander, chairman of the Senate Health Education, Labor and Pensions Committee, said a proposed rule change would help Americans who don’t have access employee-sponsored health insurance. (Tom Williams/CQ Roll Call file photo)

Industry groups and policy experts are questioning a Trump administration proposal on health insurance even as it garners accolades from congressional Republicans. 

The proposed rule, announced on Thursday, would loosen regulations under the Employee Retirement Income Security Act, or ERISA, that govern association health plans. Such plans allow businesses to band together in purchasing health insurance. Supporters say the rule is intended to help consumers hit the hardest by rising premiums under the 2010 health care law.

The Department of Labor is proposing to amend ERISA’s definition of “commonality” to include geographic location. The change would allow different types of businesses located in the same area, including multistate metropolitan areas, to form associations. The proposal would also allow self-employed workers to purchase the plans.

“If made final, this rule should help up to 11 million hard-working Americans who don’t have access to employer sponsored coverage and in addition provide new, more affordable options to Americans in the individual market who are getting hammered by skyrocketing premiums,” Tennessee Sen. Lamar Alexander, chairman of the Health, Education, Labor and Pensions Committee, said in a statement.

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The proposal follows President Donald Trump’s October executive order directing the departments of Health and Human Services, Labor and Treasury to loosen rules governing association health plans.

The order also directed the agencies to expand short-term plans and health care reimbursement arrangements, which let businesses spend pre-tax dollars on employee health care costs. The administration has not yet released regulations on those two items.

Different takes

Experts initially questioned how federal agencies would achieve Trump’s goals without stretching statutory limits. But the proposed rule is “appropriately narrow,” said Ed Haislmaier, a senior fellow with the conservative Heritage Foundation and a former Trump transition adviser.

But the rule further “muddies the waters” on state authority, said Katie Keith, a health care consultant and blogger at Health Affairs. “Clarity under ERISA, let alone its preemption standards, is already hard to come by,” Keith wrote, and the rule would introduce additional complexities.

The issue seems to be a “moving target” for the administration, said Kevin Lucia, an association plan expert and research professor at the Georgetown University Center on Health Insurance Reforms.

“Any limitation on state authority to regulate associations in the future could be problematic for consumers and increase the risk of fraud and insolvencies of these arrangements,” Lucia said.

Conservative health care consultant Chris Jacobs, founder of Juniper Research Group, called the rule a “‘kludgy’ work-around” of the regulatory structure imposed on the small-group and individual market by the 2010 health care law. The rule serves only federal regulators, not the states, he argued.

“Congress can — and should — do far better, by repealing the regulatory regime outright, and returning control of health insurance markets where it belongs: To the states,” Jacobs wrote in The Federalist.

Consumer protections

Democrats and consumer groups slammed the rule, saying it threatens a return of “junk insurance” that would create an uneven playing field with plans regulated in the small-group and individual markets. While the rule would prevent association plans from denying people coverage or charging more for certain health conditions, they would not have to offer the 10 essential health care benefits mandated by the 2010 health care law. That could lead to skimpy plans that attract only healthy people, critics say.

America’s Health Insurance Plans, the industry trade group, expressed concern that the rule would erode protections and affordable coverage in both the small-business and individual markets. The group signed a letter urging state regulators to increase protections following Trump’s executive order.

The Trump administration acknowledged that while it has good intentions, it will be hard to predict the effects of the rule. The Labor Department even cited the individual mandate as a backstop against the potentially negative effects.

“All else equal, individual markets may be more susceptible to risk selection than small group markets, as individuals’ costs generally vary more widely than small groups’,” the administration wrote. “The ACA’s requirement that essentially all individuals acquire coverage and the provision of subsidies in Exchanges may reduce that susceptibility, however.”

But Congress effectively repealed that mandate last month as part of the tax overhaul.

The overall impact of the rule could be negligible either way, considering the relatively small number of affected people, the limitations in establishing the plans and their uncertain future under the next administration. Insurance companies might not be interested in selling the plans if they don’t offer a stable business opportunity.

“Can insurers really count on this in the long term?” said Joe Antos, a scholar with the American Enterprise Institute. “Or is this going to be another thing that’s going to come and go?” 

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