Alexander: Tennessee Farmer, Plumber May Have Solution to Affordable Health Insurance

Posted on April 13, 2018

Tells Labor Secretary self-employed  and small business employees would benefit from Administration’s Association Health Plans

*Click here for video of the senator’s remarks.*

MARVYILLE, Tenn., April 13, 2018 – United States Senator Lamar Alexander (R-Tenn.) said yesterday that a Trump Administration initiative would allow a self-employed plumber or farmer or an employee of a small business to buy the same kind of less expensive health insurance that employees of large companies can buy today.  

At a hearing yesterday Alexander, who is chairman of the U.S. Senate Health and Labor Committee, told Labor Secretary Alex Acosta that the Administration’s Association Health Plans would also provide the same protections, such as coverage for pre-existing conditions, that large company employees have. The Administration’s plan is a proposed rule that would not require the approval of Congress.

“Roughly half of Americans receive health insurance from large companies where they work,” Alexander said. “This insurance is on average approximately $5000 cheaper per policy because of federal tax exemptions and deductions. The administration’s Association Health Plan proposal would provide the same opportunities, coverage protections and cost advantages to self-employed Americans or those who work for small businesses.”

Alexander told Acosta, “I’d like to talk about the Tennessee plumber who is making $60-70,000 dollars and paying $20,000 for health insurance. Or the farmer named Marty who came up to me at a Chick-fil-A and said ‘my monthly premium was $300 a month and now it’s $1,300 a month.’ It has gone up under Obamacare that much… You appear to have found a solution.”

“In effect, your proposed rule would give the same opportunities and provide the same protections to self-employed Tennesseans and Americans working for small businesses that are available to people with coverage from large employers today. … I could say to the plumber and to the small farmer in Tennessee that they could, under the terms of your rule, associate with others in similar professions and meet those qualifications, that they could buy the same sort of insurance with the same protections and at the same cost-advantage that the IBM or Wal-Mart, or employees of a large group has today. In other words, the small percentage of people in the individual market who pay their own way – the nine million Americans – would have the same kind of health care that the roughly 160 million Americans have in large group employer insurance.”

In January of 2018, the Labor Secretary proposed a rule to allow more self-employed Americans and small businesses to band together to provide a small business health plan—otherwise known as an Association Health Plan—which helps those employers reduce health insurance costs. Alexander has said, “The Administration’s proposal would take down barriers to allow more self-employed Americans and small businesses to band together in what is called an Association Health Plan, or an AHP. By banding together in an AHP, employers could reduce the cost of providing health insurance to their employees through spreading the administrative costs, bargaining for better deals from insurers, and creating a way to bring in more healthy people, which brings down costs for everyone.”

Alexander asked Acosta about the Trump Administration’s proposal yesterday at the Senate Appropriations Subcommittee on Labor Health and Human Services, Education, and Related Agencies – of which Alexander is a member – hearing to review the fiscal year 2019 Department of Labor Budget. 

You can find a full transcript of the senator’s exchange with Secretary Acosta below and watch the full video here.

Senator Lamar Alexander: I'm going to use my five minutes to talk about the Tennessee plumber who is making $60-70,000 dollars and paying $20,000 for health insurance. Or the farmer named Marty who came up to me at a Chick-fil-A and said my monthly premium was $300 a month and now they're $1,300 a month. It has gone up under Obamacare that much.

I could spend the whole five minutes talking about my disappointment that we could not agree on our proposal supported by the president and Senator McConnell and Speaker Ryan to reduce those premiums by up to 40 percent, according to independent experts. That would have meant a $20,000 premium could have gone down to $12,000 over three years. I think we've now conclusively proved that Democrats and Republicans can't agree on changing a single sentence of the Affordable Care Act, but you appear to have found a solution and I want to make sure I understand it with your proposal for association health plans.

Now the plumber and the farmer are part of 9 million Americans who aren't eligible for subsidies under the Affordable Care Act, so they're in what we call the individual market. People who are in Medicare or Medicaid get some government subsidy. More than half of Americans get their insurance on the job through employers, and my figures show that the subsidy they get is about $5,000 a person because in general, spending by the employee on insurance is exempt from income or payroll taxes, and spending by the employer is tax deductible. Does that sound about right to you?

Secretary Alexander Acosta: Senator, those strike me as reasonable numbers.

Alexander: So the difference between someone who gets insurance from IBM and someone who is self-employed and paying for their own without a subsidy starts out with a roughly $5,000 cost differential. So we could lower the cost of health insurance by $5,000 if we can find a way to make more of the small business people, or self-employed people, the farmer and the plumber, eligible for the same kind of insurance that large group people have. I assume that's your objective.

Acosta: Senator, that is the objective. We have what we call small group plans…

Alexander:  Now let me go a little more rapidly because I only have two and a half minutes, what we're not talking about are the short term limited duration plans. That's something else, right?

Acosta: That's right.

Alexander: We're talking about giving employees of smaller businesses the same kinds of insurance coverage that employees of large businesses get.

Acosta: That's correct.

Alexander: That would mean local bakeries from Nashville or Phoenix could band together, or Uber or Lyft drivers could band together, and get the same kind of coverage employees at IBM or Walmart enjoy.

Mr. Secretary, would the new protections afforded by the Affordable Care Act to the large group market -- the Walmart, IBM people -- apply to these association health plans you propose?

Acosta: The association health plans as proposed will be in the large group market, therefore the answer is the protections of the large group market apply.

Alexander: Give me as short of an answer as you can. Just as under the large group market, an association health plan would be banned from charging patients higher premiums for a pre-existing health condition. Yes or no?

Acosta: That is correct.

Alexander: Just as under the large group market, an association health plan would not be allowed to ban or deny coverage of a pre-existing health condition.

Acosta: As proposed that is correct.

Alexander: Just as under the large group market, an association health plan would be required to offer coverage to dependent children up to age 26?

Acosta: As proposed that is correct.

Alexander: Just as under the large group market, an association health plan could not cancel an employee's plan because the employee got sick.

Acosta: As proposed that is correct.

Alexander: Just as under the large group market, an association health plan cannot place a ban on annual or lifetime benefits or coverage.

Acosta: As proposed that is correct.

Alexander: Just as under the large group market, an association health plan must provide coverage of preventive health coverage free of charge to the patient. Is that correct?

Acosta: As proposed that is correct.

Alexander: So, in effect, your proposed rule would give the same opportunities and provide the same protections to self-employed Americans and Americans working for small businesses that are available to people with coverage from large employers today?

Acosta: Senator, that is the crux of the proposed rule.

Alexander: So I could say to the plumber and to the small farmer in Tennessee that they could, under the terms of your rule, associate with others in similar professions and meet those qualifications, that they could buy the same sort of insurance with the same protections and at the same cost-advantage that the IBM or Wal-Mart, or employees of a large group has today? In other words, the small percentage of people in the individual market who pay their own way – the nine million Americans – would have the same kind of health care that 160 million Americans have in large group employer insurance.

Acosta: Senator, as you pointed out, the theme of the proposal, with the caveats that this is a proposal is not final… The theme of the proposal is we have small group plans and large group plans. And within the small group market there are a number of Americans that don’t even have health care because the small business they work for does not provide health care.

So by associating together, they will have access to the large group market. So the employees of the small business would have access to the same market as the employees as Microsoft or any other large corporation with all the same protections that are for those employees.

Alexander: And the cost advantage as well?

Acosta: And the cost advantage, which is quite significant between the small group and the large group market.

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