Labor Rule Aims to Help 11 Million Americans Find Employer Health Coverage

Rule changes definition to give employers more flexibility with Association Health Plans

Sen. Lamar Alexander / Getty Images
January 4, 2018

On Thursday, the Department of Labor announced a new rule that aims to help 11 million Americans find coverage by giving more flexibility to employers to offer health insurance coverage.

While most Americans receive health care coverage through their employer, there are still roughly 11 million Americans working for either sole proprietors or small businesses who are not insured because coverage is either too cumbersome or expensive.

The rule attempts to help these uncovered individuals by helping businesses band together to offer higher quality and more affordable insurance for their workers.

"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 explains. "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 redefines and opens up the parameters for who can be involved 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 says this wider group of workers banding together may lower costs and help workers have bargaining power, but it may be exaggerated.

"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 says. "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 prevents these plans from charging higher premiums or refuse coverage because an individual has a certain health factor or condition.

Chairman of the Senate Health, Education, Labor, and Pensions Committee Lamar Alexander (R., Tenn.) said the rule should help up to 11 million hard-working Americans who don't have access to employer-sponsored coverage. It would provide new, more affordable options to Americans in the individual market who are getting hammered by skyrocketing premiums.

"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," Alexander said. "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."

"Today's announcement begins a 60-day window for employers and the general public to make comments on the proposed rule and have their voices heard, and I'm confident that the administration will properly consider this valuable input when deciding whether and how to make the regulation final," he said.