A large health plan is privately expressing concern that a little-noticed provision in the Senate health bill could drive up premiums for small-business health plans.
The Better Care Reconciliation Act, one health insurance industry source warned in a private email obtained by Vox, would “cause most small employers’ premiums to go up” and “leave consumers at risk.”
No health insurance plan has so far spoken publicly about this specific concern. The industry has so far been muted in its criticism of the Republican health care repeal efforts but, as this email shows, some are privately worried about its consequences.
The section of the law in question is one that, so far, has gotten little attention. The language is complex, but multiple experts who have reviewed the section believe it would reverse key consumer protections in small-business health plans — including the requirement to cover essential health benefits — take away regulatory power from the states, and potentially push up costs for small businesses whose workers are not overwhelmingly young and healthy.
"The problem is that it removes the states' capacity to protect consumers in their states,” says one former state insurance commissioner, who asked for anonymity to speak openly about Senate bill.
Experts worry that this re-regulating of the small-business market could disadvantage sick Americans. Small businesses with healthy employees may join associations that sign up for plans with fewer benefits and lower premiums, pushing down their employees’ premiums.
Small companies that have employees with expensive health needs, however, may get stuck purchasing increasingly expensive plans.
“I think it’s pretty clear that this would allow market segmentation,” says Timothy Jost, an emeritus professor at Washington and Lee University. “There are certainly winners and losers.”
The Republican Senate bill lets small-business health plans operate under different, more relaxed rules
The Affordable Care Act is best known for its expansion of coverage in the individual market and Medicaid. The law also included reforms for the small-business insurance market, which includes businesses with fewer than 50 employees.
Included among these reforms were new regulations for association health plans, where a group of small businesses pool together to have more purchasing power and get access to cheaper premiums. A group of bakeries, for example, might form a bakers’ association and purchase coverage en masse.
Before the ACA, national associations could pick and choose which states’ insurance rules they wanted to follow, and use those nationwide. For example: The bakers’ association could choose to follow the rules for the Alabama insurance market, which mandates coverage of relatively few benefits, for all its bakeries in New York, a state with many mandates.
The result was often health insurance that skirted state rules and advantaged businesses with young and healthy employees, who are likely to prefer skimpier health plans. The former insurance regulator described the situation prior to the Affordable Care Act as “a race to the bottom, with some associations offering lower-cost plans that covered virtually nothing.”
The Affordable Care Act changed these rules, requiring all association health plans to cover the law’s essential health benefits package. This required coverage of certain services that many states didn’t mandate, such as maternity care and prescription drugs.
The Senate bill unexpectedly looks to dismantle this part of the Affordable Care Act, giving association plans more leeway to pick and choose which health benefits their plans will cover.
This appears to be a version of allowing insurance sales across state lines, an often-promised Republican policy, except only in the small-business market.
But somewhat ironically, it would actually increase the federal role in health insurance regulation by creating a new office at Health and Human Services to oversee the association health plans and their certification. Prior to the Affordable Care Act, these functions were handled at the state level.
Analysts are still trying to make sense of these changes — but they don’t have much chance
The House-passed American Health Care Act left these regulations intact. The inclusion of association health plans in the Senate bill caught consumer advocacy groups off guard, and they are still struggling to make sense of the provision.
“Everyone assumed this issue was dead and then all of a sudden we’re trying to figure it out,” says Jost, from William and Mary. “I’ve read it a number of times and it’s really hard to figure out exactly what this is trying to do.”
What consumer advocates, however, have been able to deduce is that this Senate bill would mean fewer consumer protections in the small-business health insurance market. They expect that businesses with healthy employees would join association plans that offer fewer benefits, while businesses with sicker workers would be stuck in more generous plans with higher premiums.
As the insurance industry source put it in the email, this would “leave consumers at risk.”
Jost isn’t sure how much they’ll be able to figure out about this issue by Thursday, when the Senate is expected to vote on the bill.
“There is no way we can get together a thousand groups to oppose it in time,” he said. “It’s coming up in the context of other stuff that is much higher visibility.”