In January, the U.S. Department of Labor announced that it planned to allow small businesses to offer employment-based health insurance through Small Business Health Plans, also known as Association Health Plans. The proposed rule would only apply to employer-sponsored health insurance and would allow employers to purchase insurance as part of a much larger group, or “association”, which could potentially lower costs significantly for the businesses and their employees.
The rule could impact up to 11 million Americans working for small businesses/sole proprietors and their families.
Rather than a small business/sole proprietor purchasing a single plan or just a few plans, the association, of which the employer would be a part of, may reduce administrative costs through economies of scale to strengthen its bargaining position and purchase thousands of plans for all of its members at a lower cost and offer a wider array of insurance options.
As proposed, the rule would allow employers to form a Association Health Plan on the basis of geography or industry. A plan could serve employers in a city, county, state or multi-state metro area, or it could serve all the businesses in a particular industry nationwide.
Consistent with the Affordable Care Act’s stance on pre-existing conditions, Association Health Plans would not be allowed to charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of their health. This will be monitored by the Department of Labor.