When it passed the One Big Beautiful Bill Act, Congress created a serious problem for small businesses — the likely loss of Medicaid access for millions of small-business owners, their families and employees. Although Congress does have the ability to undo some or even all of the damage it’s going to cause, at least one piece of proposed legislation would make matters even worse for small businesses struggling to access quality, affordable healthcare: the Association Health Plans Act.
Before the One Big Beautiful Bill Act, healthcare expenses were ballooning. While it’s clear that we need to lower expenses for entrepreneurs, we shouldn’t do that at any cost, including sacrificing the reliability and quality of healthcare coverage. Unfortunately, that’s what the Association Health Plans Act would do.
While allowing entrepreneurs and their employees to have portable health benefits is a worthy goal, this legislation provides the illusion of helping small-business owners and employee enrollees. AHPs might lower healthcare costs on paper for the businesses that choose to enroll in them; however, these plans are not required to offer many of the essential health benefits and consumer safeguards that plans regulated under the Affordable Care Act are required to provide.
After all, most of us wouldn’t rush to sign up for a health insurance plan that doesn’t include maternity care, mental health services and prescription drug coverage. Those are examples of some of the benefits not found in many AHPs.
AHPs may also charge some enrollees higher premium rates based on gender and occupation, while at the same time having no rules on how much more older people are charged than younger people. AHPs primarily benefit businesses with younger, healthier employees while leaving older employees and those with pre-existing medical conditions with inadequate coverage. While these plans may seem more advantageous economically, small businesses and their employees may end up paying much more out of pocket to cover their basic healthcare needs when compared to coverage under the ACA.
AHPs don’t only harm enrollees. Their broad expansion would destabilize the healthcare insurance market for small businesses that chose to purchase a regular healthcare plan. When healthier customers exit the small group market in large numbers, it creates a risk imbalance that can lead to significant premium spikes for small firms that remain in the small group market. This would result in a segmented market where businesses with young, healthy workers enroll in cheap, skimpy AHP plans. In contrast, businesses that hire older workers remain in ACA plans with much higher premiums. Many employees who need robust healthcare services may eventually be priced out, which can create an uneven, inaccessible market with plans that are too costly for businesses to offer their employees.
Thankfully, there are better policy solutions to lower healthcare costs. Congress should limit fees that hospital systems add to bills for appointments at facilities they own. These fees add hundreds of dollars to a patient’s visit, even for routine and preventive care. Additionally, the ACA’s enhanced premium tax credits help many eligible individuals and families cover the cost of health insurance purchased through the ACA Marketplace, and more than 2.7 million small-business owners and self-employed entrepreneurs claimed them in 2022.
The enhanced premium tax credits are set to expire this year, which would cause 4.2 million individuals to lose coverage. Congress should extend this enhanced credit to keep premiums from rising by 25 percent to 100 percent so that small-business owners and employees can afford to keep their plans.
Regrettably, Congress’s slashing of Medicaid will make healthcare less accessible and less affordable for many Americans. A recent Georgetown University and Small Business Majority analysis found that one-third of all people enrolled in Medicaid are connected to small businesses and would make up a large percentage of the 10 million people who will become uninsured. This will raise premiums for people with employment-based insurance as healthcare providers come under financial strain.
Thankfully, there’s still time for Congress to act before the cuts begin. Legislation has been introduced to roll back some of the Medicaid cuts.
Small businesses need affordable health plans instead of deceptive gimmicks that expand access to riskier and inadequate coverage options. Rather than undermining the small group market, Congress should support it by extending premium tax credits to prevent a drastic premium hike for many businesses and their employees.