Tennessee demonstrates why his executive order on AHPs was necessary.
On October 12, President Trump signed an executive order that could expand the ability of small businesses to purchase health care for their employees through Association Health Plans. In response to this proposal, a headline at Vox screamed: “Tennessee has insurance rules like the ones Trump proposed. It’s not going well.” But AHPs merely allow people to buy into the same types of plans that 90 million Americans covered by the nation’s large businesses currently enjoy. Far from being an outlier from national norms, the dysfunction of Tennessee’s individual market is a characteristic product of the unstable risk-pooling arrangements established by Obamacare — a problem Trump’s executive order helps to fix.
For the past 43 years, health-care benefits funded directly by large employers have been regulated under the Employee Retirement Income Security Act. ERISA regulations free nationwide employers from state regulations that hobble the ability of insurers to negotiate good rates with hospitals, state mandates that cost more than they are worth, and benefit requirements that micromanage how care is delivered. This allows them to deliver care in innovative and cost-saving ways — getting huge discounts through direct primary care or surgery purchase arrangements with centers of excellence, and sometimes cutting out insurance companies altogether.
Obviously, big insurers aren’t generally fond of this alternative, but the savings have helped ensure that 96 percent of large employers provide health-care benefits to their workers, compared with 50 percent of small businesses. Ninety million Americans are currently insured through ERISA, compared with 18 million on the individual market. The executive order proposes to make it easier for small employers to combine to form Association Health Plans, so that they, too, can provide health-care benefits under ERISA rules.