It only took 14 years.
Back in 2004, when I was state chairman of West Virginia’s Association of Builders and Contractors, I worked closely with Sen. Robert Byrd’s office to try to expand association health plans, which allow small businesses to join together to negotiate lower health care costs.
Today, that goal is on the cusp of being realized. The Department of Labor is set to issue a new rule expanding association health plans, finally giving small businesses an attractive option to escape Obamacare’s perpetually rising costs.
President Donald Trump campaigned on allowing health care coverage to be sold across state lines. This reform will reduce health care costs because it will usher in far more supply options, reducing prices in the same way that interstate competition reduces prices in all other products and services. Last fall, he issued an executive order directing the Department of Labor to expand association health plans to make this longstanding dream a reality.
Specifically, the Department of Labor’s forthcoming rule will regulate the plans at the federal level under the 1974 Employee Retirement Income Security Act (ERISA), freeing them from the confusing patchwork of statewide regulations that reduce competition and drive up prices. This will also level the playing field between small businesses and their big businesses competitors, whose health plans already fall under ERISA.
Small businesses need these association plan options now. They have arguably been the biggest victims of Obamacare-induced premium increases. According to an analysis by the Employee Benefits Research Institute, small-employer health coverage fell by one-third between 2008 and 2015 because of cost increases. Small businesses neither have the economies of scale nor the risk pool to negotiate the attractive plans of big businesses. Association health plans allow small businesses to overcome these hurdles.
More than 95 percent of West Virginia employers are small businesses. Wouldn’t it be nice if they could worry more about growing, and less about a top-heavy, government-controlled health insurance industry?
Just think: If every one of the 115,162 small businesses identified in the state by the Small Business Administration in 2016 added just one employee, our economy would truly boom without government getting involved.
That brings us to the other change the Department of Labor will issue in the coming weeks: relaxing association health plan industry classification rules. Currently, only businesses with a “commonality of interest” — say builders and contractors — are allowed to form health plans. The new rule should allow simply being a small business to meet the commonality requirement. This will also allow more plans to form and grow, increasing their negotiating power and risk mitigation, further reducing health care costs.
Perhaps the biggest winners from such expanded plans would be sole proprietors, which make up roughly 80 percent of all small businesses in the country.
At the moment, sole proprietors are mostly relegated to the individual market, where costs increased by 25 percent this year in West Virginia, following several years of double-digit increases, and around 50 percent in states like Georgia and Florida. Insurers are fleeing these exchanges; in one-third of counties in the country, only one remains.
These high costs and lack of options are a big reason why small business creation continues to fall even in today’s bull market. Why would an employee with an office job take the risk of pursuing the American Dream if it means giving up solid employer-provided health insurance to contend with the individual marketplace that is in the beginning stages of a death spiral?
Short of comprehensive health care reform, expanded association health plans are the most promising health care reform to reduce costs for the 85 million American small businesses and their employees. Combined with recently passed tax cuts and regulatory relief, they would reinvigorate the spine of America’s small business backbone.
Better late than never.