The Department of Labor is proposing new health insurance plan rules for self-employed Americans and small businesses that would allow them to band together to provide and purchase association health plans (AHP).

Sole proprietors and the self-employed would be able to join association health plans for the first time, under the DOL proposal. Existing rules block working owners who lack employees from joining such plans. “Current regulations have limited the self employed and sole proprietors to options available in individual markets where premiums may be higher and choices narrower,” the DOL said.

The proposal would allow small businesses to form an AHP on the basis of common geography or industry. An AHP could cover all the businesses in a state, city, county or multi-state metro area, or it could serve all businesses in a particular industry nationwide.

In another move designed to create competition, businesses would be able to cross state lines when purchasing health insurance.

If approved, the changes would allow beauty salons, electrical companies, gyms, restaurants or retailers—as well as any of their independent contractors—to band together to form an “employer” in order to purchase health insurance for themselves and their families. 

The goal of the proposal “is to expand access to affordable health coverage, especially among small employers and self-employed individuals, by removing undue restrictions on the establishment and maintenance of association health plans under ERISA,” the DOL said.

The proposal would also encourage the formation of new health insurance offerings by allowing associations to be formed nationwide for the sole purpose of offering health insurance plans for the first time. This is prohibited under current rules.

The changes could make insurance available to 11 million self-employed or small business employees—"like farmers, or songwriters, or small businessmen and women--who today are priced out of our health insurance system," Sen. Lamar Alexander (D-Tenn.), chairman of the Senate Health and Labor Committee, said in a statement.

The Dol said in a statement, “The proposal would permit working owners of an incorporated or unincorporated trade or business, including partners in a partnership, to elect to act as employers for purposes of participating in or sponsoring an employer group or association health care plan.”

Regulations currently stipulate that members of an AHP have to be in the same industry and that they have to be involved in the day-to-day decisions of a business. In contrast, the proposal would allow the any association to offer a plan, including the U.S. Chamber of Commerce, whose members are in diverse businesses in all 50 states.

The health insurance industry is opposing the proposal. “Americans deserve affordable choices and we are concerned that the changes proposed would leader to higher prices and weaker consumer protections in the small group and individual markets, where nearly 40 million Americans get their coverage,” Kristin Grow, a senior vice president at America’s Health Insurance Plans, told Financial Advisor Magazine.

“We will continue to participate in the formal rulemaking process to recommend alternative solutions to increase competition, choice and affordability,” Grow said.

Critics worry that AHPs may seek to charge those with pre-existing conditions higher premiums or deny them or the employer’s they work for coverage altogether.

The proposal prohibits discrimination “that would restrict membership in the association itself based on any health factor, such as: health status, medical condition (including both physical and mental illnesses), claims experience, receipt of healthcare, medical history, genetic information, evidence of insurability and disability,” the DOL said.

Alexander said that consumers with pre-existing conditions will be safeguarded. “These policies will have the same sort of consumer protections that employees of large companies have, such as protections against being charged higher premiums for having a pre-existing condition."

Sen. Rand Paul, (R-Ky.), who has been working with the Trump administration to expand association health plans for a year, said in a statement that the proposed regulation would ensure employees and the self-employed aren't denied coverage or charged a higher rate because of a pre-existing illness.

Secretary of Labor Alexander Acosta is responding to an executive order issued by President Trump in October to expand access to health coverage by allowing more employers to form association health plans (AHPs).

“Expanding access to AHPs would provide more affordable health insurance options to many Americans, including hourly wage earners, farmers and the employees of small businesses and entrepreneurs that fuel economic growth,” Trump said at the time.

The DOL is accepting public comments on the proposal until March 5.