Should Small Businesses be Allowed to Form Associations for Buying Their Employees Health Insurance? (H.R. 1101)

What is H.R. 1101?

(Updated May 17, 2020)

This bill would allow small businesses to create association health plans (AHPs) so they can join together to increase their bargaining power in the health insurance marketplace and use that leverage to offer their employees more affordable healthcare coverage. AHPs could include businesses from different states, and they would be exempted from state-mandated benefit laws.

AHPs would need to be certified by the Dept. of Labor, which would create class certification systems for fully-insured association plans and for self-insured association plans. AHPs that also offer benefits that aren’t health insurance would be required to have reserves and stop-loss insurance to cover those benefits in addition to making contributions to a fund that would be used to pay for stop-loss insurance for AHPs that may not be able to pay out their claims. If an AHP doesn’t meet these requirements it would be subject to termination.

States would be able to tax contributions to AHPs under certain circumstances. However, states would be prohibited from barring health insurers from offering insurance through a certified AHP, or from blocking insurers from offering insurance of the same policy type to other employees that are eligible for coverage under AHPs.

Under current law, small businesses are prohibited from forming interstate associations to buy health insurance for their employees, which disadvantages them relative to large businesses and labor organizations because of their size and economies of scale.

Argument in favor

Small businesses are at a disadvantage when it comes to negotiating for quality, affordable health insurance to provide their employees. Allowing them to band together in association health plans would make getting health insurance coverage more economical for companies and their employees.

Argument opposed

This bill would leave small businesses and their workers vulnerable to unaffordable health insurance that offers fewer benefits. Association health plans may help the fortunate few who can join them pay less for health insurance, but everyone else who doesn’t join will have to pay more.

Impact

Small businesses and their employees; association health plans (AHPs); and states.

Cost of H.R. 1101

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Sam Johnson (R-TX) introduced this bill in the hope of completing another step in the process of replacing the Affordable Care Act (commonly known as Obamacare) with “patient-centered solutions,” in this case giving small businesses the ability to offer employees health insurance through association health plans (AHPs):

“Due to Obamacare’s burdensome and expensive regulations, fewer and fewer American small businesses can afford to offer health care coverage – which in turn hurts American families. A commonsense way to help empower these small businesses is to allow them to join together when shopping for health care plans.  This will allow them to have the same strength in numbers as large businesses and labor organizations.  And the benefits will be real for hardworking American families.”

House Democrats on the Education and Workforce Committee concluded their dissent against their bill in its committee report by noting that this bill would “erode the protections in the ACA” and expose small businesses and workers to what they view as lower quality insurance:

“Association health plans let the fortunate few form an association where they are able to pay less than average, but everyone else outside of the association will have to pay more. The Committee should protect the progress of the ACA and work to improve and expand coverage; the expansion of AHPs will only threaten affordable coverage for those outside of those associations.”

This legislation was passed by the House Education and Workforce Committee on a party-line, 22-17 vote with all Democrats opposed to it. It currently has the support of 37 cosponsors, all of whom are Republicans.

Media:

• Sponsoring Rep. Sam Johnson (R-TX) Press Release
  
• Committee Report
  
• Washington Examiner