Health care deeply divides Americans, but most agree that our health care system had difficulties before enactment of the Affordable Care Act (ACA). Still, after implementation of ObamaCare, many old problems remain while new ones were created. Given today’s contentious political environment, can anything be done to improve this state of affairs? The Labor Department’s newly published regulation on Association Health Plans (AHPs) delivers an emphatic yes, promising to make health coverage in the small business sector both less expensive and more widely available.
{mosads}Small businesses inherently face unique challenges in purchasing health insurance. Their limited size translates into small risk pools. Business margins are often thin and backed by few or no reserves, making these entities extremely sensitive to price and cost increases.
The ACA created additional obstacles for small businesses. First, ObamaCare places more stringent regulatory health coverage requirements on smaller enterprises than on large companies, driving up the costs of insuring small business workers and placing small employers at a severe competitive disadvantage. Second, ObamaCare compounds these economic headwinds by requiring small businesses to purchase health insurance at expensive “community rated” prices.
Democrats in Congress knew when they passed health care reform that many small businesses could ill afford the added expense of their expansive health care experiment. That is why they exempted employers with fewer than 50 employees from the health coverage mandate that applies to larger employers.
Providing health benefits helps small businesses compete for workers in tight labor markets and avoid efficiency-killing turnover, but the impact of the ACA’s dictates on small business-provided health insurance was predictable. As expenses have increased, many small enterprises have found themselves unable to supply health insurance to their employees. The Employee Benefit Research Institute has reported that the percentage of small businesses offering health coverage to their employees has dropped dramatically since ObamaCare was enacted. According to the Department of Labor, up to 11 million Americans who work for small businesses and their family members now lack employer-sponsored insurance.
The Labor Department’s AHP rule will remedy the situation by encouraging small businesses, including sole proprietors, to provide coverage. The rule lifts unnecessary and outmoded restrictions on cooperation, allowing small businesses to band together to purchase insurance. Creating larger purchasing groups will enhance their negotiating power and drive down prices. Small businesses can finally enter the health insurance market on the same terms as larger employers, creating substantial benefits for their workers. Labor Secretary Alexander Acosta has crafted that rarest of Washington measures: a government health care policy that simultaneously increases coverage and decreases costs.
Unsurprisingly, the tut-tutting of objecting technocrats has already begun. Some claim AHPs allow small businesses to circumvent the health care reform’s purported “patient protections.” However, small businesses will be subject to the same federal requirements that apply to large employers, and few believe ObamaCare has left large businesses under-regulated. Most important for workers, flexibility in governmental dictates is clearly preferable to lack of coverage.
Others argue that AHPs may drive up already skyrocketing prices on health care exchanges by giving healthy small business workers alternatives to participation in them. The likely effects of AHPs on ObamaCare prices is hotly disputed, but either way the objection makes little policy sense. Large employers cover many more workers than do small ones. Therefore, it is neither reasonable nor fair to rely on small businesses and their workers, who are already paid less than large company employees, to prop up ObamaCare’s exchanges.
Washington notoriously accomplishes little during the summer months. The Department of Labor’s refreshing AHP rule is a rare exception. While Senate Democrats preen for the cameras by demanding that the Senate spend its canceled August recess debating health care, the Trump administration has been hard at work implementing significant systemic changes to deliver more health coverage to workers at better prices.
Dr. Roger Klein is a molecular pathologist and attorney in Cleveland. He is a member of the Regulatory Transparency Project’s FDA and Health Working Group. He is a former advisor to the FDA and HHS. Dr. Klein graduated from Yale Law School and completed his postgraduate medical training at Yale Medical School.