Trump takes another bite out of ObamaCare, letting small businesses band together to buy health insurance

By Dan Calabrese —— Bio and Archives June 19, 2018

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Depending where you get your news headlines, you might have seen some stories today decrying that the Trump White House has launched another “attack” on ObamaCare, and is looking to further “undermine” the law. Well. To the extent the law makes the reasonable purchase of health care unaffordable to many Americans, President Trump absolutely should undermine it in every way he can. Hopefully he can undermine the obstacles ObamaCare places between people and policies they actually want and can afford. And he took a big step in that direction today with a new regulatory rule that expands the freedom of smaller businesses to band together into associations and buy health insurance as a group.

This matters because without the new rule, smaller businesses would be stuck with the limitations of their size and the lack of leverage that provides in purchasing group insurance. If you only have eight employees, you don’t bring much purchasing power into your negotiations with an insurer. But if you’re part of a larger group that seeks to ensure 8,000, now the economies of scale work more in your favor. Under the new rule, a group of small businesses could band together through, say, their local chamber of commerce, and purchase insurance under the same terms as one gigantic employer. That’s going to put the employees under this association into a bigger risk pool and allow those negotiating on their behalf to hold out for better deals. And these employees won’t be stuck buying insurance on the ObamaCare exchanges. The left hates it, of course, for two reasons: One is that the association health plans will be exempt from the “essential benefit” requirements that apply to the exchanges, which means they might buy a policy that doesn’t cover certain things the 2009-10 Democrats deemed absolutely mandatory, but that the individual buying the policy doesn’t really believe is necessary to have insured. If you buy on the exchanges, too bad. You must pay for those benefits whether you want them or not. But if your employer buys insurance as part of an association, you have the freedom to go without them. The left thinks you should be forced to buy these benefits because you don’t know what you need. We think what you need is up to you. The second reason the left hates this is really the same as the first, but looked at in a different way: If healthy people have the option of sidestepping the exchanges, then the risk pool buying on the exchanges gets older, poorer and sicker, and that makes the exchanges less stable. That’s true, but the solution is not to force people onto the exchanges who want nothing to do with them. It’s to reconceive how you provide health coverage for those too poor to get it in the normal way. The ObamaCare model of forcing everyone into the same system has been a disaster. Ramesh Ponnuru explains further:

The Labor Department official concedes that some effect of this type is likely to happen. But he notes that many exchange participants are shielded from premium increases by subsidies, and that AHP participants are likely to save a lot on premiums. Avalere’s projection of the effects, which is pessimistic with respect to coverage levels and exchange premiums, also notes that “[p]remiums in the new AHPs are projected to be approximately $2,900 a year lower compared to the small group market and $9,700 a year less compared to the individual market.” Like other health-policy changes during the Trump administration — notably the end of the “individual mandate” fining people for going without health insurance — this one will free some people to leave the exchanges and thus make the exchanges have more of the character of a highly subsidized high-risk pool. Republicans have long advocated high-risk pools as a solution for the hardest-to-insure population. In any case, keeping an arbitrarily-defined group of people — those who work for small businesses that don’t offer health insurance — from having more attractive options in order to provide a hidden subsidy for the exchanges does not seem like a policy Republicans should have any qualms about abandoning.

The difference between the left and the Trump White House on this is that the left thinks it’s a bad thing when people are free to leave the exchanges. They wanted “everybody in, nobody out” to be the way things would work, because they thought that would make the risk pool of the exchanges manageable. But they designed the exchanges in such a way that no one wants to be on them if they don’t have to. The Trump White House, by contrast, thinks it’s a win if people have more freedom to choose the options that works best for them. That’s what the expansion of association health plans will do. What the left sees as “undermining ObamaCare,” normal people will see as liberating them to make their own decisions.