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A Labor Department proposed rule that would make it easier for small businesses to band together to provide health insurance--thus getting the volume breaks large employers enjoy--had its first checkup ever on Capitol Hill. Several stakeholders offered their prognoses at a House subcommittee hearing.
How the rule would affect coverage was at the forefront of the debate over the proposed expansion of association health plans.
The House Committee on Education and the Workforce’s Subcommittee on Health, Employment, Labor, and Pensions heard testimony March 20 from real-estate professionals, franchisers, a health-care attorney, and the small business community about the DOL proposal that would expand access to association health plans by changing the definition of “employer.” The change would make it easier for small businesses to band together into groups based on industry or geography and form health plans for their members.
The DOL proposed the rule after the administration asked it to consider expanding access to the plans in an October 2017 executive order. The comment period for the rule ended March 6.
The proposed rule would allow plan sponsors to create insurance with “skimpy” coverage because it lacks consumer protections that require plans to cover certain health benefits, Rep. Lisa Blunt Rochester (D-Del.) said before the subcommittee.
The proposed rule doesn’t require plans, which would be treated as large employers, to cover essential health benefits as required under the Affordable Care Act. Critics, like Blunt Rochester, say the cheaper, less robust plans would lure healthy people away from the individual and small-business markets of the ACA, leaving behind an older, sicker population.
“To me, this is going backwards,” Blunt Rochester said of the proposed rule’s lack of protection.
John Arensmeyer, founder and CEO of the advocacy group Small Business Majority, echoed Blunt Rochester, saying that without a minimum benefit requirement, plan sponsors could intentionally exclude people by not offering certain benefits.
“The plans could exclude services for maternity coverage or mental health treatment, preventing small businesses with employees that need such services from enrolling,” Arensmeyer said. Consumers would also lack state protection because the regulation governing the plan could pre-empt state law.
That argument solicited an emotional response from several lawmakers and stakeholders.
Reps. Paul Mitchell (R-Mich.) and David P. Roe (R-Tenn.) said they were offended by comments that small businesses and associations might not always act in the best interest of their membership. During their questions, both congressmen cited their personal experiences in small businesses.
“I’m astonished and frankly a little offended with your comment that there’s not a joint economic interest--that we don’t have the same level of economic interest in the well being and health of our employees as large businesses do,” Mitchell said, addressing Arensmeyer.
Similarly, Roe said small employers value their employees and don’t want to abandon them when adverse health conditions arise. “It’s offensive to me when people come up here and say I would do that or small business owners would do that,” he said.
“This isn’t about skimpy. This isn’t about cheating or predatory practices and hurting employees,” Catherine Monson, CEO of Texas-based graphics and sign franchiser FASTSIGNS International Inc., told Bloomberg Law. “This is about providing the most amazing quality health insurance.”
Modern employees and job candidates are savvy and frequently seek out information about what a company’s health plan offers, Monson, who testified on behalf of her company and the International Franchise Association, said. That prompts employers to be competitive with what they offer.
“We would look to have a plan that would be similar to what big companies offer,” Monson said. “It’s all about having an even playing field and being able to get the best employee candidates.”
The IFA supports the rule in a comment letter but asked the DOL to include a provision that would safeguard against association plans implying a joint-employer relationship. Monson reiterated this request, telling the subcommittee that without a protection against joint-employer relationships, “we feel it is very unlikely the benefits of this policy will take hold.”
Michael McGrew, CEO of Kansas-based McGrew Real Estate who testified on behalf of the National Association of Realtors, said the real-estate agents would benefit from the proposal because the majority of their workforce is self-employed. The NAR wants to ensure, however, that all self-employed workers that don’t have employees working under them can also join an association health plan, and making clear that states couldn’t undermine the rule.
Chris Condeluci, principal and sole shareholder of his law firm CC Law & Policy PLLC in Washington, said there are existing regulations that would continue to protect consumers. Condeluci is a former Senate Republican aide.
“States will continue to have the ability to regulate these plans” whether they’re fully insured, meaning employers purchase the policy for employees from an insurer, or self-insured, meaning employers pay claims out-of-pocket, Condeluci told Bloomberg Law after the hearing. Every state has some level of regulation for a self-insured plan, he said, Some laws are permissive and some are restrictive, he said.
Association health plans “are subject to the ACA’s coverage requirements,” Condeluci said in his testimony. “Meaning they cannot deny someone health coverage if they have a pre-existing condition, cannot refuse to provide free coverage for certain preventative services, and cannot impose annual lifetime limits on the federal essential health benefits covered under the plan.”
Other ACA, Employee Retirement Income Security Act, Health Insurance Portability and Accountability Act, and state requirements will apply to association plans as well, Condeluci said, and the DOL will retain its ability under the ACA to regulate the plans.
The issue of fraud was also a point of discussion during the hearing. Blunt Rochester and Arensmeyer both brought up the history of fraudulent and insolvent plans similar to association health plans. But it wasn’t only critics of the DOL proposal who expressed concerns about fraud.
“There’s merit to the concern over fraudulent arrangements,” Condeluci said. “There’s going to be bad actors out there. There always are with any change in the law.”
The DOL needs to have the proper resources to regulate the plans and the states need to continue being able to regulating the plans, he said.
Monson also addressed the issue, telling Bloomberg Law that finding ways to reduce fraud wouldn’t be as difficult as finding ways to expand access to health care.
“I’ll let the lawyers figure out how to write the regulations to reduce fraud, but let’s unleash the power of competition and group buying power to give affordable, quality health care to millions more Americans who don’t have it today,” Monson said.
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