In an effort to assist approximately 11 million Americans in finding health insurance, the Department of Labor announced a new rule Thursday which allows businesses to band together to offer higher quality and more affordable plans for their employees.
According to The Washington Free Beacon, the rule gives new options to many small businesses and sole proprietors who do not offer insurance to their employees due to the expense of doing so.
“The proposed rule, which applies only to employer-sponsored health insurance, would allow employers to join together as a single group to purchase insurance in the large group market,” the agency said. “By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.”
Thomas Miller, a resident fellow at the American Enterprise Institute, said the rule allows for more inclusion of individuals in an Association Health Plan.
“It widens the definition of what an employer is, it includes groups of workers who maybe are working for different companies, but they’re either within a similar industry or a type of occupation or it could be defined by geography,” Miller explains. “That allows, hypothetically, more of those type of workers who tend to be working for small employers to access this particular type of coverage.”
Miller noted that the new rule is intended to lower the costs of health insurance for many Americans.
“The rationale, aside from providing some type of additional coverage options and theoretically more attractive coverage, means at least the hope is that because these will be larger plans by aggregating small elements — in many cases businesses below 50 or very much smaller or sole proprietors in the aggregate — that larger collection of lives will have several advantages,” Miller said. “One is, although I think it will be exaggerated, that they will have more bargaining power. It might be able to stretch baseline administrative costs over a wide base of workers and employers’ employees, so that makes them less administratively expensive. And in theory that by being larger they might be able to better craft more attractive or a desired set of benefits.”
The rule also prohibits plans from charging higher premiums or refusing coverage due to a preexisting condition.
Chairman of the Senate Health, Education, Labor, and Pensions Committee Lamar Alexander, R.-Tenn., commended the new rule, saying, “The rule would give these individuals and small business employees the same sort of lower cost insurance opportunities that the 178 million Americans have who buy insurance through their employers. These policies will also have the same sort of consumer protections that employees of large companies have such as protections against being charged higher premiums for having a preexisting condition.”