The Trump administration proposed regulations Thursday to allow people in similar lines of work to band together and purchase health plans across state lines, moving to make good on a key campaign promise from President Trump.
The Labor Department’s rules, if finalized, would expand so-called association health plans, allowing self-employed individuals and small businesses to band together as if they were big corporations and qualify for plans that don’t have to follow Obamacare’s strict coverage requirements.
“This starts to create a parallel insurance market for small businesses and self-employed people that is less regulated than under the Affordable Care Act,” said Larry Levitt, senior vice president at the nonpartisan Kaiser Family Foundation. “Association health plans could offer cheaper coverage that covers fewer benefits, which could prove attractive to healthy people.”
During the presidential campaign Mr. Trump repeatedly pointed to allowing purchase of insurance across state lines as a major fix Obamacare needed.
But Democrats complained the new policy will undermine Obamacare’s economics by allowing healthy people to buy less-robust health plans, hiking prices for older and sicker customers.
“Instead of working to make health care better and more affordable in the new year, the president is choosing to undermine Americans’ health care to score political points,” said Sen. Ron Wyden, Oregon Democrat.
The proposal would allow self-employed persons, even if they don’t employ other people, to join large associations to purchase coverage while treating small businesses that join forces like members of the large-group insurer market. As a result, their plans do not have to comply with Obamacare’s mandated slate of “essential” benefits.
People with pre-existing conditions could not be denied or charged more than healthy people, preserving a key tenet of the Affordable Care Act.
However, critics said the plans might be able to cherry-pick healthier customers by shaping what they choose to cover.
“You can’t say, ‘We don’t accept anyone with cancer.’ But you can say, ‘We won’t cover chemotherapy.’ The net result is the same,” said Timothy Jost, a law professor at Washington and Lee University who tracks the health care debate.
Republicans, though, praised Mr. Trump for the move, saying it would help an estimated 11 million Americans who don’t have access to employer-based coverage and feel they cannot afford plans under Obamacare.
“Conservative health care reform is alive and well, and I will keep working with President Trump to build on this progress,” said Sen. Rand Paul, Kentucky Republican who pushed for the idea as broader GOP attempts to repeal Obamacare faltered.
The White House said Mr. Trump had to act because too many counties have only one insurer to choose from in Obamacare’s exchanges, while fewer workers at small businesses are getting insured through their employer, so new options were needed.
Republicans were supposed to solve these problems legislatively, but their seven-year push to repeal and replace Obamacare sputtered last year.
Mr. Trump laid the groundwork for Thursday’s proposal with an executive order in October instructing the Labor Department to consider a broader interpretation of the Employee Retirement Income Security Act to allow employers “in the same line of business anywhere in the country to join together to offer healthcare coverage to their employees.”
The publication of the proposal will kick off a 60-day comment period. The Labor Department will review the comments and draft a final rule, meaning the entire process could last several months.
Mr. Trump says the GOP should still pass a comprehensive replacement to Obamacare moving forward. At the same time, he said the GOP’s recent decision to axe the “individual mandate” requiring people to hold coverage or pay a tax “essentially repealed” the law.
Insurers say repeal of the mandate will further upend the markets, since it was included in the law to spur healthy people to sign up.