Blog - New Tax Proposal Exempts Small Businesses From Some ACA Rules

New Tax Proposal Exempts Small Businesses From Some ACA Rules

New Tax Proposal Exempts Small Businesses From Some ACA Rules

The White House is proposing changes that would allow millions of small businesses and the self-employed to buy health-insurance plans that don’t comply with all ACA requirements through regulatory action.

The proposal would allow businesses that share geography or an industry in common to form an association and sell members health policies that are exempt from some of the health law’s requirements. They would no longer be required to comply with an ACA rule that offers a mandatory array of benefits, such as substance-abuse treatment.

There are nondiscrimination provisions in the rule (a draft was released on 1-4-18) that would prevent an association from cherry-picking employers with healthy workforces or charging higher premiums to less-healthy people. And an association couldn’t charge different premiums to different small employers based on health factors.

Some worry about allowing the plans to not cover the mandatory ACA benefits could enable associations to essentially exclude people by not offering coverage for specific treatments, such as chemotherapy.
The proposal was praised by a number of Associations as a way to enable small businesses to have the same bargaining power as large companies by ‘evening the playing field’. Self-employed people not receiving subsidies to offset premiums also heralded the provisions.

Supporters of the ACA say the proposal would gut the individual insurance market – providing a way for healthy and younger people necessary to offset costs of older and sicker consumers – to exit from the exchanges. The concern is that it would drive up premiums and leave the exchanges a market populated by subsidized consumers and many people with pre-existing health conditions who would have to pay far more.

Many feel the proposal goes further than many health analysts expected, especially by enabling self-employed individuals who are sole proprietors to take part in associations. Thus millions of people who now buy their own coverage on the ACA exchanges could instead obtain plans that don’t comply with its benefit requirements.

Important to note: business groups would get a boost by enabling them to band together as associations and offer the same type of coverage as their larger competitors.

The regulation wouldn’t preempt state law; states still have a critical role to play since those state regulating insurance – by selling plans in two states could be subject to two different sets of rules.

The proposal allows small businesses to band together to offer the same kind of benefit plans that large companies now offer, including plans that have more flexibility with the types of benefits they offer. Greater bargaining power could also lower the cost of their plans and help some companies be more competitive in luring workers.

The ACA seeks to establish certain consumer protections, mandating that plans cover “essential” benefits and prohibiting insurers from charging higher premiums to people who are unhealthy or unwell. About 20 million people have gained coverage under the ACA since 2010.

Supporters of the ACA have said that relaxing the rules on associations could destabilize the individual insurance market, where roughly 17 million people buy their own insurance either on or off the ACA exchanges. They fear that enabling individuals to join associations would provide an off-ramp from the exchanges that would drain away the younger, healthier people who are needed to keep premiums in check.

The proposed rule was published on 1-5-18 in the Federal Register and will now undergo a 60-day public comment period. The White House will also release a proposal soon that paves the way for more short-term health policies that have fewer benefits.

Source: WSJ – Jan. 5, 2018

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