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Trump administration releases proposal to allow workers to band together for health insurance

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President Trump's executive order intended to allow people to buy lower-cost health insurance that can circumvent some of the mandates created under Obamacare. The Department of Labor proposed a rule that would allow smaller businesses to band together to buy health insurance. (AP Photo/Evan Vucci)

The Department of Labor released a proposed rule to allow workers to band together to receive health insurance.

The rule is in response to President Trump's executive order intended to allow people to buy lower-cost health insurance that can circumvent some of the mandates created under Obamacare. It has been billed by supporters as allowing insurance to be sold across state lines.

The Department of Labor's proposal, released Thursday, makes regulatory changes to the Employee Retirement Income Security Act, known as ERISA.

The proposed regulation would change the definition of "employer" by allowing individual workers or small groups of people with a "commonality of interest" to join together, such as people who are engaged in the same kinds of trade or business. By doing so, they would be considered one large employer for the purpose of providing coverage.

Regulations currently stipulate that members have to be in the same industry and that they have to be involved in the day-to-day decisions of a business.

"The goal of the rulemaking is to expand access to affordable health coverage, especially among small employers and self-employed individuals, by removing undue restrictions on the establishment and maintenance of association health plans," according to the proposal.

The proposal would relax existing requirements that associations sponsoring health plans must exist for a reason other than offering health insurance and the requirement that association members share a common interest, as long as they operate in a common geographic area. Associations whose members are in the same industry, however, could sponsor health plans, regardless of where they do business.

For instance, smaller restaurants or retailers would be able to band together to provide health insurance for their workers. The National Retail Federation and the National Restaurant Association praised the move.

“The National Restaurant Association applauds the administration for supporting healthcare options for small businesses to allow them to pool their resources to provide healthcare for their employees," Clinton Wolf, senior vice president of health and insurance services for the restaurant group, said in a statement.

Association health plans used to be more common before Obamacare, which placed restrictions on their use. Critics have been concerned the regulations would allow skimpier plans to be sold to customers or they would allow people to be charged more based on their health status. Under Obamacare, plans must offer a wide-range of medical services, from coverage for maternity care to addiction treatment, and cannot charge a people with a pre-existing illness more or deny them coverage.

Lifting these protections would offer less comprehensive coverage, but would also make health plans less expensive. Critics worry that they set people up for "junk insurance" and would further destabilize the Obamacare exchanges, which already are plagued with mass exits by insurers and double-digit premium hikes. The move, critics say, could result in an even sicker population on the exchanges while healthier customers are picked off into the association health plans.

But the office of Sen. Rand Paul, R-Ky., which had been working with Trump on expanding association health plans, said the regulation would continue to ensure that people aren't denied coverage or charged a higher rate because of a pre-existing illness. In the proposal, authors write states have rules mandating these protections under Obamacare.

“For the past year, I have worked with the President and his administration to dramatically increase the availability of health care while at the same time decrease the costs," Paul said in a statement. "I applaud the administration for its action today, and I look forward to the finalization of the proposed rule. Conservative health care reform is alive and well, and I will keep working with President Trump to build on this progress."

The Department of Labor is accepting public comments for the next 60 days.