"Thanks to the efforts of the Trump administration and Sen. Rand Paul, R-Ky., millions of people will soon have access to more affordable health insurance.
On Tuesday, the Department of Labor finalized a new rule expanding under federal law access to association health plans, which will provide small business owners and their employees, as well as sole proprietors, with the ability to gather together to purchase group health insurance plans."
He claims this is a "remarkable improvement" that will result in much lower health insurance premiums for the people who will have this new way to buy such insurance. But in my opinion he merely assumes that premium rates for this new kind of small group insurance plans will be as low as premiums for large group insurance plans.
I am very skeptical and note that his article indicates no understanding of underwriting and rate-setting. I expect the new rule will have little or no effect on them. Insurers will continue to underwrite members of small groups almost like they do individuals. Imagine a group consisting mostly of people in very poor health, e.g. most have had heart attacks. If it offers coverage, a rational insurer will do so with a very high premium, one commensurate with the poor health of the individual members. There is no miraculously cheap rate simply as a result of making a group. Also, why would a very healthy person -- even if he/she is a member of the group -- buy this high-priced group insurance when he/she could buy cheaper individual insurance?
What sort of people do you think will seek to buy this new sort of health insurance? More likely than not they will be the ones who need and want it most, i.e. the less healthy ones. This is called adverse selection in the insurance business. Rational insurers aren't going to offer more risky small groups the same premium rates they charge large groups of mostly healthy people.
An earlier post I made about this is here.
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