Senator Rand Paul (R-KY) urged the White House on Tuesday to expand Association Health Plans (AHPs) as a means by which to circumvent Obamacare regulations, whose costs have driven insurance carriers to drop their participation in the program. Paul’s plan envisions Americans joining together across state lines to form profession-specific organizations that would collectively bargain with insurance companies for coverage.
While larger consumers inevitably get better deals by buying in bulk, the chief virtue of the Paul plan is using the Employee Retirement Income Security Act (ERISA) to evade Obamacare regulatory requirements. If widely authorized, AHPs would bury Obamacare with greater choice and competition in health insurance markets, but the Trump administration will need to bend if not break the law to achieve that end.
The healthcare provisions of ERISA, first passed in 1974, enable large corporations or entities to establish a single health plan or set of plans for all employees, rather than having to comply with the rules and regulations of every state in which they operate. To this pre-emption of state law for ERISA-compliant plans, Congress added exemptions to many Obamacare regulations. ERISA plans thus benefit from the absence of many onerous state as well as federal mandates.
In blue states, such as New York, California, and Illinois, every conceivable interest group tangential to healthcare lobbied their legislature to require their inclusion on the list of minimum coverage. If you’re not interested in chiropractic, mental, or pre-natal care, too bad; you’re stuck paying for it. If you’re young and healthy and only want catastrophic coverage, too bad; you’ll pay for the chronically sick and the old.
The mother of all mandates is the Obamacare "guaranteed issue," whereby one can forgo insurance until getting sick and the insurance company must accept you, paid for courtesy of those who keep their coverage.
The current death spiral in the individual (i.e. non-ERISA) insurance markets has seen healthy young people drop insurance, only to leave behind sicker and more expensive participants in an ever shrinking and unaffordable pool. Only the government mandating everyone buy insurance could have stabilized the market, but that solution that was never practical to begin with, and has now been voided by the Trump administration refusal to enforce it.
Federal subsidies in the tens of billions of dollars have been funneled into the insurance industry in order to prevent a wholesale collapse of the individual insurance market, but their continuance is far from certain. Certain monies were not appropriated by Congress, but were nonetheless transferred by the Obama administration, and are thus subject to elimination under Trump. Multiple lawsuits are at various stages in the courts, but if the Trump administration is determined not to pay the insurance companies, the courts will have a difficult time forcing them to comply.
As Obamacare implodes — 45 counties will have no insurance provider next year, and 1,388 counties will have only one — Senator Paul’s plan to use Association Health Plans (AHP) as a means to evade the wreckage of Obamacare may prove irresistible.
For example, there are approximately half a million plumbers and pipefitters in the U.S., and were they allowed to form an AHP, they would instantly become the second largest employer health plan in the nation and exempt from all state and many federal regulations. Multiply that by every profession imaginable and a fully functioning insurance market can rise around the ashes of Obamacare.
There’s just one problem: it isn’t legal.
Health plans involving employees from different companies or the self-employed are classified as Multiple Employer Welfare Arrangements (MEWA) under ERISA, and are subject to approval only if they comply with a list of restrictions. Under section 3(40)(3)(i) the parties to the MEWA must be “the product of a bona fide collective bargaining relationship between the employers and the employee organization(s).”
Clearly, half a million plumbers are not involved in the same collective bargaining process outside of healthcare, and are thus not eligible under the law. Indeed, specifically excluded is an agreement that is “a scheme, plan, stratagem, or artifice of evasion, a principal intent of which is to evade compliance with state law and regulations applicable to insurance,” which aptly describes the use of AHPs in this context.
Given the precedent set by Obama, however, when he systematically refused to enforce immigration law, might it not be time for Republicans to recognize that we are living in a post-rule of law environment and act accordingly? Were Secretary of Labor Acosta to approve every AHP that applied as ERISA-compliant, the sole remedy for liberals hell bent on herding everyone into their socialist collective would be an appeal to the courts.
Assuming the courts granted an injunction voiding ERISA-compliant status for an AHP, and the Department of Labor complied, litigants would still be forced to hunt down every other AHP whose compliance was certified, but not yet enjoined. That is, of course, assuming that Labor is willing to disclose such information. Freedom of Information Act requests can take years to fulfill (see Hillary, emails).
While the administration fights an endless delaying action, and profusely apologizes for misunderstanding (yet again) the directives of liberals on the court, millions of Americans would experience the salvation of having affordable healthcare tailored to the needs. Once the market is established, even Chuck Schumer will have a hard time destroying it.
If Trump is to prevail against the socialization of American healthcare, and prevent the subordination of the individual’s life to the State, he is going to have to get his hands dirty and learn how to fight as a liberal Democrat would if the roles were reversed.
P. H. Guthrie is a former Republican campaign operative. His work has appeared in USA Today, Real Clear Politics, The Federalist, and The Daily Caller. He has also appeared on "The Dan Caplis Show" on KNUS 710. He currently resides in the Washington, D.C. area. Follow him on Twitter @PHGuthrie. To read more of his reports, Go Here Now.
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