Proposed Regulations Pose Threat to Private Insurance Markets

The DC Health Benefit Exchange Authority on Tuesday submitted official comments to the U.S. Department of Labor withdrawal of its controversial proposed rule on association health plans (AHPs).

If finalized, the proposed rule will cause people in the District to become uninsured and lead to premium increases for D.C.’s residents and small businesses.

“This proposed regulation essentially repeals the Affordable Care Act without Congress,” said Mila Kofman, executive director of the exchange. “By exempting AHPs from the requirements of the ACA, AHPs will cherry-pick the healthiest businesses and people to cover. Older and sicker people will be forced to rely on state regulated markets, which will collapse if there no healthy people participating.

“There is also an undisputed history of AHP fraud and insolvency,” Kofman said. “This proposal would set state regulated markets back to the turbulent days before the ACA and make it even worse by tying the hands of states, preventing them from protecting their residents and small businesses.”

According to Oliver Wyman actuaries, thousands of people will become uninsured, specifically as many as 2.4 percent of people with small-group coverage and 2.94 percent of people with individual coverage currently would become uninsured in the District as a result of this proposal.

Small businesses and residents who keep their comprehensive coverage will see premium increases — small-group claims costs would increase by as much as 25.8 percent and individual market claims costs would increase by as much as 10.9 percent — because association health plans would be allowed to insure only the healthiest businesses and individuals causing rates to increase for everyone else.

Under DOL’s proposed rule, AHPs would be would be exempt from most of the ACA’s consumer protections, including requirements to cover essential health benefits such as maternity, mental health and prescription medication. Under this proposed rule, AHPs would also be exempted from the ACA rate reforms that prohibit premiums based on gender, group size and industry/occupation, and limit age-based rating.

DOL’s proposed rule also creates new ambiguity on whether state regulators can continue to have oversight of AHPs and enforce state consumer protection laws. With no meaningful standards or oversight, the proposal opens the door to scams and insolvencies, which in the past have left hundreds of thousands of people with millions in unpaid medical bills across the United States.

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