Democrats in a dozen states filed a lawsuit Thursday challenging President Trump’s decision to let small employers and self-employed people pool together and buy health plans that are cheaper and cover fewer benefits than what Obamacare dictates.
State attorneys general involved in the effort, led by New York and Massachusetts, say the Labor Department failed to account for the risk of fraud in opening the door to association health plans and issued its rule for the sole purpose of undermining Obamacare.
“We have zero tolerance for any action that undermines the Affordable Care Act and puts health care coverage at risk for thousands of people,” New York Gov. Andrew Cuomo said.
The association plans have long been a goal for congressional Republicans who say it’s a way for people to take advantage of the group insurance market, even if they are self-employed or work for a business too small to provide insurance.
It’s also the first major change the administration has made to Obamacare’s framework since Congress repealed the individual mandate in last year’s tax-cut bill.
Under the new rule, released in June, small companies can join forces within a geographic area or even nationwide, if they employ the same trade, such as baking or real estate. The plans must abide by the same protections for sicker or older Americans as those that apply to large companies, yet they wouldn’t have to cover the full range of benefits mandated by the 2010 Affordable Care Act, so things like mental health or maternity care might be missing.
Blue-state attorneys general say the expansion of association health plans is the wrong way to extend cheaper options. They say historically, bad actors have come in and swindled consumers by swiping premiums and refusing to pay claims.
Their complaint, filed in the U.S. District Court for the District of Columbia, says their states will have to free up resources “to police a flood of inadequate or fraudulent plans newly offered by associations.”
They also say they’re doing just fine under Obamacare, citing a drop in uninsured rates.
“The rule challenged here aims to undo this progress and will destabilize state insurance markets, increase fraud and abuse, decrease comprehensive health coverage, and substantially increase costs to the States,” the lawsuit says. “When health plans do not sufficiently cover health care or plans are no longer affordable, our residents suffer.”
The lawsuits asks the court to strike down the Labor Department’s rule on grounds it is “arbitrary and capricious” and did not provide a legal basis for treating associations as large employers.