The number of small businesses offering employees group healthcare fell to a historic low last year. If you’re running a small business, that’s probably no surprise: healthcare is a significant cost and it’s a struggle to provide affordable health insurance for your employees. But there may be another, potentially better option for controlling these costs.
After months of deliberations, the Department of Labor this week issued its final rules that now allow small businesses to band together in order to purchase their healthcare insurance as a larger buying group – or association.
The requirements for forming an association are loosely defined and could include businesses in similar geographic areas, industries or trades. The idea is that once an association grows to include more than 100 employees, the companies that belong to it can purchase their health insurance without being subject to the more onerous requirements of the Affordable Care Act and can therefore exclude certain benefits which could result in lower premiums.
“Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies,” the labor secretary, Alexander Acosta, said in this CNN report. “Association Healthcare Plans are about more choice, more access and more coverage.”
There are some protections for employees. For example, though rates could be based on an employee’s gender, age and the industry of the employer, premiums would not be allowed to reflect an employee’s health status and an employee could not be excluded from a plan because of any prior condition. Most of the regulations would be subject to state oversight too.
Critics say that association health plans will erode the base of healthier customers who purchase their individual policies on the healthcare exchanges and therefore cause an increase in premiums for less healthy people. Others believe that the ruling will potentially cause a rise in fraudulent plans that could potentially pay out less than customers expect. But these concerns are not deterring some associations from moving forward with their own plans.
Mary Beth Sewald, the CEO of Las Vegas’s chamber of commerce, says that many of her members are eager to bring back the plans, which were a popular benefit that covered more than 20,000 members in her group for more than 30 years before the introduction of the Affordable Care Act. “I’ve had members actively pursue me, asking: ‘When can you bring this back?’” she told the Las Vegas Review-Journal. “I think this is going to have an extraordinary impact. It was one of the most valued benefits of chamber membership.”
So will this new rule be a silver bullet for controlling your company’s healthcare costs? Depending on the age and health histories of your employees it could be a legitimate option. But before you go off to join an association or form your own, you may want to tread carefully: this recent decision is not law. It’s only a rule based on an executive order from the president – and, as we’ve learned, it’s very easy for the next president to quickly change those rules.
- Gene Marks is a columnist, author and small business owner. His company, the Marks Group PC, provides technology and financial management services to SMBs in the US and abroad
