The administration has been looking for lifeboats for Americans trapped in old ACA exchanges. One project is to expand “association health plans,” on Association Health Plan (AHPs), that let employers team up to offer coverage. But the fine print in the proposed Labor Department rule is causing concern and needs to be cleaned up.
Whether the new rule will let association health plans set prices based on risk, which is how insurance is supposed to work. The point of the rule is to let businesses enjoy the flexibility that large employers have under a law known as Erisa. Under the ACA bigger businesses have fared much better than those stuck in the small group market, which is heavily regulated.
Labor proposed the rule earlier this year, and the problem comes in the finer points of its “nondiscrimination” details. Some commenters say the language would block plans from pricing based on health status or past claims data. This is not about turning down individual workers with cancer. No one is talking about firing the guy with multiple sclerosis to save money, which is illegal.
The question concerns groups of employees. The health-privacy (HIPAA) law and the ACA let large employers “rate” groups of employees based on, say, health questionnaires, provided these people are grouped in ways that aren’t about health status. One example: A large company with a packing facility in Nevada can price that group differently from a call center on the East Coast. The plans won’t work without this rational pricing that reflects underlying reality. Yet the proposed Labor rule appears to preclude this.
The ACA also barred this kind of pricing in the small business market but added a subsidy to make up for the resulting disruption. TriNet (a health benefits company) states: The rule “not only puts AHPs at a disadvantage over large businesses as stated earlier, but it also puts AHPs at a disadvantage over the current ACA-mandated small group market.”
The draft rule could also damage existing group plans. A Wisconsin medical group runs one such plan that covers small practice physicians and their families. The society suggests that the rule’s “nondiscrimination provisions threaten the financial stability of existing AHPs and create structural issues that could lead to future insolvency.”
The point of the rule is to create a vibrant market, and the criticism hits the mark. Labor is reviewing comments on the rule, and it needs to fix the nondiscrimination provisions. The administration has made association plans a priority, and a bad outcome would make health markets worse.