OPINION:
In the weeks before the midterm elections, millions of Americans are poised to get yet another surprise in their mail — their premium increases for next year’s health insurance.
It’s an annual ritual where people dread getting their mail like they dread April 15, because they know it’s coming and they know their rates are going up, usually by a lot. Obamacare was sold to the people as ending this mailbox roulette, but it has only made things worse. But there is a solution, a simple one, as it turns out — association health plans.
The idea behind association health plans, or AHPs, is that people should be allowed to band together with their fellow Americans in similar professions to purchase group health insurance at lower rates. It’s a simple idea — the larger the pool of participants the lower risk to insurance companies, therefore the lower the premiums.
The current system benefits large companies with hundreds, if not thousands, of employees. They have the buying power and pool of participants to lower the per-person premiums to a manageable level. They also offer so many potential customers that their business is appealing to insurance companies that fight for their business. Competition, wherever it’s allowed to happen, always works.
But smaller businesses, or the self-employed in the individual market, don’t have that leverage. Buying in bulk offers discounts in grocery shopping as well and health insurance, and the smaller players simply can’t. They could, however, up their buying power if they were able to band together with similar small businesses, through trade or business associations, and lower their rates. This is especially important for professions like truck drivers, realtors and consultants, who are almost all independent contractors, even when they are affiliated with a firm.
As is all too often the case when it comes to common sense ways to address problems, the government stands in its way.
The Trump administration is attempting to remove some of the barriers that prevent more Americans from qualifying for AHPs, freeing the millions of Americans working for small businesses of the self-employed stuck in the significantly more expensive individual market.
That freedom, however, is butting up against Obamacare regulations. Rather than give more individual liberty, choice and the free market a chance help those struggling with health care costs, a dozen Democratic attorneys general across the country are suing to stop it.
The complaint they allege is AHP plans are sub-standard, that they don’t meet the requirements for health plans mandated by Obamacare. According to the suit, the new rules “would undo critical federal consumer protections and unduly expand access to AHPs without sufficient justification or consideration of the consequences.”
What are those consequences? The attorneys general say healthy people will abandon insurance plans bought through the federal exchange set up in Obamacare, leaving only people with high medical needs on Obamacare, which would increase the premiums of the sick. In other words, if people are allowed to band together to lower their costs it could cost other people more, so they shouldn’t be allowed to do it.
However, more than 80 percent of individuals with Obamacare plans receive government subsidies that can pay for nearly all of the cost of their plans. The real cost then falls on that 20 percent of working professionals who make too much to qualify for the subsidies, but aren’t employees of big companies.
AHP opponents cite an insurance term known as “adverse selection,” the idea that healthy people will choose cheaper plans, leaving the sick with expensive plans that cover more and the prices for those plans will become too expensive for anyone to afford, leading to a “death spiral” for those plans. But a 2003 study in Heath Affairs found that in the Federal Employees Health Benefits Program which, like Obamacare, includes government subsidies to cover the cost of premiums, adverse selection was basically non-existent.
These attorneys general may really believe allowing people more options for their health insurance will leave people behind, but the evidence suggests it’s more political posturing than actual concern. If people are afforded the freedom to get out of Obamacare, allowed to engage freely in the market however is best for them, the further away from a government-run program we get. And that directly opposes the goals of the political left.
Freedom works everywhere it’s tried, including in the health insurance market. The freedom to band together with people in similar positions to increase buying power is an incredible tool to lower costs and help more people. But that doesn’t empower government and it exposes one of the basic problems with Obamacare that one size can fit all. Neither of those options are appealing politicians whose objective is “Medicare for All,” which is nothing more than socialized medicine with a new name.
• Richard Topping is a health care lawyer and the CEO of Shao Inc., based in Washington, D.C.
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