Sen. Rand Paul (R-Ky.) may be a doctor, but he obviously doesn’t have the cure for what ails small businesses. During a discussion on health care policy in his home state, Paul said President Donald Trump is likely to legalize association health plans on the federal level, which would allow more groups of similar businesses to band together to purchase insurance. Paul claims this would allow small businesses to negotiate lower rates and insure more people, but what he and others who support this idea fail to understand is that these plans would actually do the opposite.
Some lawmakers, including Sen. Mike Enzi (R-Wyo.) and Paul, have long touted association health plans as a great solution to the health care needs of small businesses. Unfortunately, Enzi and Paul simply don’t understand what would actually happen to insurance markets if these plans were ever widely available. Small businesses frequently buy plans through the small-group market, which is subject to different rules and protections than the large-group market. The regulatory difference between the two is significant. As a report by the Kaiser Family Foundation noted, plans sold in the large-group market can charge people more based on their health status, and they’re not required to cover essential health benefits like prescription drugs, emergency services or maternity care. However, Obamacare-compliant plans in the small-group market provide protections against being charged more based on health, age or gender and include these essential benefits.
Unfortunately, the Senate has considered two proposals this session that would create association health plans and undo these health care gains for small firms – one is found in the likely dead Affordable Care Act replacement bill known as the Better Care Reconciliation Act, the other in a standalone bill called the “Small Business Health Fairness Act.”
Some businesses or associations with common interests are already allowed to pool their resources in order to provide insurance for their members and employees, a concept Paul supports because he wrongly believes it offers “more leverage to get protections against pre-existing conditions and high prices.”
The association plan proposals would do the opposite, however. While the legislation would make it easier for more small businesses to purchase association plans that might be cheaper in other states, the trade-off is that these multi-state plans would offer few consumer safeguards. In fact, employees covered by these association plans would not actually be protected in the state where they live since the regulations created for the specific plan would supersede state laws that protect consumers from rate increases and poor coverage.
There is another problem. If these plans were made widely available, some small businesses with healthier employees would surely band together and purchase plans that cover fewer benefits. This would result in the emergence of parallel insurance markets for small businesses, leading to major spikes in premiums for small firms that remain in the small-group market.
To put it simply: Expanding association health plans would be a “nuclear bomb” for the small-group insurance market, which now covers about 18 million Americans.
Rather than offering a practical solution for the problems small businesses face, the health care plans offered by Congress so far this year would be nothing but bitter pills. America’s job creators already have enough challenges without Congress making it harder for them to access health insurance for their employees and themselves. If lawmakers truly want to help small businesses, they must stop trying to repeal the ACA and should instead take up a bipartisan plan that would strengthen the health care law and the small-group market in order to bring down costs for small businesses. That is the treatment small firms really need.