WASHINGTON — A sweeping new rule issued Tuesday by the Trump administration will make it easier for small businesses to join forces and set up health insurance plans that circumvent many requirements of the Affordable Care Act, cutting costs but also reducing benefits.
President Donald Trump, speaking at a 75th-anniversary celebration of the National Federation of Independent Business, said the new rule would allow small businesses to “escape some of Obamacare’s most burdensome mandates” by creating new entities known as association health plans.
“You’re going to save massive amounts of money and have much better health care,” Trump said to cheers from the audience of small-business owners. “It’s going to cost you much less.”
As a result, he said, “you’re going to save a fortune.”
Alexander Acosta, the labor secretary, said the rule would give small businesses access to insurance options like those available to large companies, starting as soon as Sept. 1. Millions of people could benefit, he said.
“As the cost of insurance for small businesses has been increasing,” Acosta said, “the percentage of small businesses offering health care coverage has been dropping substantially. Today, the Trump administration helps level the playing field between large companies and small businesses.”
The new health plans would be exempt from many consumer-protection mandates in the Affordable Care Act. They may not have to provide certain “essential health benefits” like mental health care, emergency services, maternity and newborn care, and prescription drugs.
Labor Department officials said association health plans would not be able to deny coverage or charge higher rates to individual employees with pre-existing medical conditions.
Still, consumer groups and many state officials opposed the push for association health plans. They said such plans would draw healthy people out of the Affordable Care Act marketplace, driving up costs for those who need comprehensive insurance.
Sen. Chuck Schumer of New York, the Democratic leader, said Tuesday that the new rule would open the door to “junk health insurance.” It is, he said, “the latest act of sabotage of our health care system by the Trump administration.”
The new final rule carries out an executive order signed by Trump on Oct. 12.
The rule will allow small-business owners, their employees, sole proprietors and other self-employed people to join together to buy or provide insurance in the large-group market through association health plans.
Because they will be exempt from many requirements of the 2010 health law, Trump has said, the association health plans can “provide more affordable health insurance options to many Americans, including hourly wage earners, farmers and the employees of small businesses.”
The new health plans might, for example, appeal to restaurant workers, real estate agents, dry cleaners, florists, plumbers and painters, officials said.
Under the rule, Acosta said, “business associations from city chambers of commerce to nationwide industry groups can offer health care insurance to the employees of their employer members through the large-group market.”
Trump administration officials said that small businesses and self-employed people in the same industry, state or region could band together and obtain health coverage as if they were a single large employer — even if they had no other connections to one another.
Until now, the Labor Department has required a much greater “commonality of interest” among small businesses that wanted to be treated as a large group when buying insurance. And the government often looked at the size of each company, rather than the group as a whole, to determine if it was a large or small employer.
The new rule takes a step toward fulfilling Trump’s campaign promise to make it easier for companies to sell insurance across state lines.
“For the first time ever,” Trump said Tuesday, “sole proprietors will be able to come together and buy lower-cost group insurance instead of getting ripped off by this disaster that we all know as Obamacare. These actions will result in very low prices, much more choice, much more freedom, including in many cases new opportunities to purchase health insurance. You’ll be able to do this across state lines.”
The new rule prohibits certain kinds of discrimination. Association health plans cannot charge higher premiums to some employers based on the health status of those companies’ employees, and they cannot discriminate because of any “health factor.”
The Labor Department gave 10 examples of how the new rule would work. An association health plan for restaurants could not deny membership to a business with several employees with large health claims. Nor could it exclude an employee with diabetes or charge that person more because of the disease.
But, the Labor Department said, an association plan for agriculture could charge different premiums to employers in different lines of business, like growing crops, raising livestock, harvesting seafood or producing timber.
Likewise, an association plan open to all employers based in a particular state could charge different premiums to employers in construction, education, financial services or other sectors, and could set different rates for part-time and full-time employees, so long as those distinctions were not based on health factors.
The Labor Department said it did not believe association health plans would write their membership rules to avoid high-cost areas or high-risk professions, as some consumer groups fear. An association offering a health plan is free to define its membership criteria, provided those standards do not operate as “a subterfuge for discrimination” based on health factors.
Critics were not convinced. “This rule will erode the availability of affordable comprehensive coverage in most states’ individual and small-group markets,” said Keysha Brooks-Coley, a vice president of the lobbying arm of the American Cancer Society.
Association health plans can either buy commercial insurance or pay claims out of their own assets. States can regulate both types of health plans, but the Trump administration said it could, in the future, pre-empt state insurance laws that “go too far in regulating” self-insured plans.
Similar small-business health plans have a history of fraud and abuse that have left employers and employees with hundreds of millions in unpaid claims.
The Coalition Against Insurance Fraud, representing insurers, consumer groups and law enforcement officials, met with Trump administration officials last month and emphasized the need for states to have a strong role in combating possible fraud.
James Quiggle, a spokesman for the coalition, said Tuesday that the new rule “could be an invitation to scam operators to try and slip bogus health plans through the regulatory system and into the marketplace.” For this reason, he said, it is imperative that the Labor Department have more money and personnel to vet and supervise association health plans.
The Labor Department said it would monitor the new plans to ensure compliance with the law and to protect consumers. States will share enforcement authority with the federal government, it said.
Trump predicted that “big percentages of this country” would form or join association health plans. “In fact,” he told small-business owners, “while you’re in the room together, shake hands, form an association. Good luck!”
This article originally appeared in The New York Times.