Yesterday, the Trump Administration released information on its plan to expand the use of association health plans (AHP). (here) AHPs allow small businesses and potentially individuals to band together to form a large group for health insurance purposes. (here) Large group insurance plans are regulated by ERISA laws and are not subject to the regulations and mandates in the Affordable Care Act (ACA).

Small businesses are typically start-up or low-margin companies where the added cost of employee health insurance can mean the difference between success and bankruptcy.

 The ACA attempted to establish an exchange marketplace for employers with fewer than 50 full-time-equivalent employees. The Small Business Health Options Program (SHOP) was designed by Congress to help “businesses provide health coverage to their employees.”

The demand and interest level of employers in an insurance exchange such as SHOP was never determined and to date, its utilization has been quite small. There is speculation and anecdotal evidence that SHOP was placed in the ACA for political convenience, rather than at the insistence of the law’s architects or for any real benefit it might bring to small employers.

There are no real free-market choices in the small group market and the individual Obamacare exchanges.  ACA proponents will claim that competition exists, yet all insurance plans offered in the exchanges must contain the ten federal government-mandated essential benefits. Insurance premium prices must be approved by the government. Consequently, individuals and employers only have government-approved plans and not meaningful choices or real competition.

Opponents of AHPs call them “junk insurance” simply because they don’t have all of the benefit mandates that Obamacare plans are required to have. Yet the point of insurance is to protect people from unexpected occurences, not to provide payments for every medical issue. Why should a healthy young man be required to pay for obstetrical coverage? Why should a non-drinker need to pay for alcohol rehabilitation treatment?

Association health plans offer a real solution for small business owners who want to provide employee health benefits without the massive regulatory burden associated with the Affordable Care Act. AHPs are based on voluntary associations, and they have a track record of offering quality health insurance at a reasonable price.

The Administration estimates that four million Americans will take advantage of AHPs by 2023, with 400,000 of these people previously uninsured. (here) Without all of the Obamacare mandates, premiums for AHP plans are estimated to be thousands of dollars less than plans in the current individual and small group markets.

If structured properly, the AHP market can be competitive and can allow small employers to access the same health insurance price and benefit advantages that large employers enjoy. The key is the voluntary choices made by small employers, their employees, and other individuals in seeking affordable health coverage without all of the mandates in Obamacare.