The legal landscape for a major health insurance reform shifted dramatically Thursday with a decision from the U.S. District Court for the District of Columbia. The ruling, by Judge John Bates, struck down a Trump administration policy making it easier for small businesses and self-employed workers to form Association Health Plans and buy the same low-cost, high-quality health insurance usually reserved for large companies.
A report from the National Conference of State Legislatures found small businesses pay between 8 and 18 percent more than large businesses for similar health plans. AHPs could narrow that gap.
Bates said the U.S. Department of Labor’s regulatory change would harm the Affordable Care Act and the stability of the Obamacare health exchange small group market.
“The Final Rule was intended and designed to end run the requirements of the ACA,” Bates wrote in his order. He said the Labor Department rule “relies on a tortured reading of the ACA’s statutory text that undermines the market structure that Congress so carefully crafted.”
The U.S. Department of Justice disagreed with the court’s ruling. “The Administration will continue to fight for sole proprietors and small businesses so that they can have the freedom to band together to obtain more affordable, quality health care coverage,” said a statement from the department to Carolina Journal.
The ruling came as the state House and Senate grapple with separate plans to expand AHPs in North Carolina. House Bill 464 was introduced last week by Reps. Kyle Hall, R-Stokes; Holly Grange, R-New Hanover; Josh Dobson, R-McDowell; and Brian Turner, D-Buncombe. The Senate passed its version, Senate Bill 86, March 14 by a 38-8 bipartisan vote. It was referred to the House Rules Committee.
Under an AHP, small businesses and self-employed workers join together to use their larger clout for discounted premiums and better coverage through a third-party insurance company. Some associations bypass insurance company overhead and lower costs by self-insuring.
The decision discourages John and Lois Watson of Wilmington, who are buckling under the strain of expensive and diminishing health care coverage.
The Watsons are middle class, self-employed workers. She creates conceptual architectural renderings to help companies market building projects. He sells janitorial and restaurant supplies. They are a few years shy of retirement, but may have to sell their house to pay health insurance premiums that shot up under Obamacare.
“Over the past 15 years we have spent a total of $230,000 on health insurance premiums,” she said. They’ve paid $103,000 the past five years as costs spiked for an Obamacare-compliant plan.
They try to keep monthly premium costs below $2,000 to fit their budget. That requires continually scaling back benefits coverage, and increasing co-payments and deductibles.
She went without insurance for two years to pay for her husband’s plan. He suffers chronic kidney stones which sometimes require costly emergency room visits or hospitalization.
Between the court decision and the competing legislative plans, “I just feel like it’s going to be a long, drawn-out process,” Lois Watson said, with no immediate relief.
The House and Senate measures both make it easier to create AHPs by bringing state laws and insurance codes into alignment with federal regulatory changes that opened the playing field. Some research suggests up to 110,000 North Carolina residents could benefit from more AHPs.
But the House bill is more restrictive. It says AHPs must operate only in North Carolina and offer statewide coverage. It leaves in place Obamacare regulations saying businesses must have at least 26 employees before they can self-insure and requiring AHP plans to provide coverage equal to 60 percent of the actuarial value of covered benefit costs. It also requires a membership group (such as a chamber of commerce) to have been in existence for at least five years before it can launch an AHP.
By contrast, the Senate plan would let AHPs operate in several states, as long as they’re contiguous; allow AHPs to set up regional plans; give employers with as few as 12 workers the ability to self-insure; excludes the actuarial coverage mandates; and lets associations two years old or older start AHPs.
Deputy Senate leader Ralph Hise, R-Mitchell, a co-sponsor of S.B. 86, said insurance companies that sell small group insurance plans to businesses are pushing back against AHP reforms. They’re unhappy about the competition.
“I am not surprised at all that House members have some different ideas. I look forward to creating a dialogue that resolves any difference so that we can help more North Carolina citizens obtain high-quality health care services,” said Sen. Chuck Edwards, R-Henderson, a primary sponsor of S.B. 86.
Kev Coleman, president and founder of AssociationHealthPlans.com, who thinks the AHP market could produce $18 billion in premiums by 2022, slammed the court decision. His research shows 28 AHPs recently opened in 13 states, and six more are poised to launch. Thousands of employees and family members within the small business community have already enrolled in AHPs.
“While I do not believe [the] ruling will survive appeal, I believe Judge Bates’ decision is an unnecessary detour on small businesses’ path toward more affordable health coverage,” Coleman told CJ.