Association health plans could lower costs as ACA premiums jump 58%

The U.S. Labor Department has submitted a draft rule to the White House that would broaden the definition of "employer" under ERISA, potentially opening association health plans to self-employed workers and small businesses facing ACA marketplace premium increases averaging 58 percent this year.

"They're going back to the drawing board on the definition of employer, which is what they did originally, but parts of it were struck down," said Kaye Pestaina, director of the program on patient and consumer protection at KFF, a nonpartisan health policy research group. "It's hard to guess what they'll do to get around the court's concerns."

The proposal, under review by the Office of Information and Regulatory Affairs, marks the second attempt by the Trump administration to expand AHP eligibility. The 2018 rule was vacated by a federal judge in 2019 after 11 states sued, and formally rescinded by the Biden administration in 2024. Large employers face 9.5 percent premium increases next year, while typical small businesses face 14 percent, according to Aon and KFF estimates. Insurers in the ACA marketplace are seeking a median 15 percent premium increase for 2027.

If enacted, AHPs treated as large-group plans — those with at least 51 enrolled employees — could offer lower premiums to younger enrollees by sidestepping ACA age-rating rules and coverage mandates. But shifting younger, healthier workers out of the ACA marketplace could shrink the risk pool and push premiums higher for the roughly 11.9 million independent contractors and others who remain.

The proposal comes as health insurance affordability has become a political flashpoint. Enhanced ACA subsidies that lowered premiums for a broader swath of enrollees expired at the end of 2025, after the Trump administration and Republican congressional majority rebuffed Democratic efforts to extend them. Premium payments for enrollees have increased by an average of 58 percent this year, according to a May analysis by KFF.

Some enrollees still qualify for premium tax credits if their household's modified adjusted gross income doesn't exceed 400 percent of the federal poverty level — a single individual earning $62,600 hits that threshold this year. Earning one dollar over the limit generally means paying the full, unsubsidized premium. Through the marketplace, the average unsubsidized premium for a benchmark silver plan for a 40-year-old consumer is $625 per month, according to KFF.

What AHPs Could Change

Under current law, AHPs generally can only be offered through associations whose members are in the same industry and have employees of their own. Many trade associations include sole proprietors who don't qualify, and some organizations have members across multiple industries. The 2018 rule extended the ERISA definition of "employer" to self-employed workers and allowed associations to qualify based on shared geography alone.

The National Association of Realtors, with more than 1.4 million members, has long pushed for broader AHP access. "Self-employed real estate professionals deserve the same health coverage choices that employees and union members already have," said Shannon McGahn, executive vice president and chief advocacy officer for NAR. About 14 percent of NAR's members are uninsured, she said.

When an AHP is treated as a large-group plan, it must follow some of the same rules as individual coverage but not all of them, said Justin Giovannelli, an associate research professor at Georgetown University's Center on Health Insurance Reforms. It doesn't have to follow the ACA's age-rating rule, which caps a 64-year-old's premium at three times the rate for a 21-year-old. It could also exclude or limit certain coverage areas required under ACA individual and small-group plans.

"The thinking is that most of those self-employed business owners aren't eligible for premium tax credits, and that's why they pay more, and that's why this option for AHPs might be better for them if they are allowed to participate," KFF's Pestaina said.

The Risk Pool Trade-Off

The potential cost savings for AHP enrollees could come at the expense of the ACA marketplace. If mostly young, healthy workers shift to AHPs because they're cheaper, the remaining ACA risk pool would be smaller and sicker — translating into higher premiums for those left behind.

"They might be able to purchase cheaper coverage, but then there's the implication for everyone else who's left in the marketplace," Pestaina said.

The proposal is still early-stage. It's under review at OIRA, and the specific provisions aren't public yet. Whether it again attempts to reach the self-employed through AHPs — the provision that triggered the 2018 court challenge — remains uncertain. Readers should verify details against the latest official announcement from the Labor Department once the rule is published.

This article is for informational purposes only and does not constitute professional advice.