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.