“A neighborhood restaurant or plumbing company will never have the purchasing clout of a Fortune 500 corporation on its own,” says health expert Sally Pipes. “But there is no reason federal policy should prevent hundreds of those businesses from joining forces to bargain for a better deal.”
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Small businesses have struggled with the rising cost of health insurance for years. The Trump administration may soon give them a meaningful way to fight back.
The Labor Department has submitted a proposed rule to the White House that would establish new pathways for groups of employers to band together and sponsor association health plans, or AHPs. By combining workers from many firms, AHPs can give small businesses the scale, bargaining power and benefits-management sophistication that large employers already possess.
The timing could hardly be better. Ninety-four percent of Americans say the president and Congress should act on healthcare costs. And 79% of likely voters in nine Senate battleground states say healthcare costs will be very important to their vote.
AHPs offer a practical answer to that demand. They address a real problem in today’s market—that small businesses are much less likely than large employers to offer health insurance.
Ninety-seven percent of firms with at least 200 workers offer health benefits, compared with just 59% of firms with 10 to 199 workers. Among smaller firms that don’t offer coverage, 41% say cost is the main reason.
When smaller firms do offer coverage, workers often pay more for it. Employees with family coverage at firms with 10 to 199 workers shelled out an average of $8,889 toward premiums last year. Their peers at larger firms contributed $6,227, on average—some $2,600 less.
Association health plans attack that disparity in two ways. The first is scale.
A 20-person accounting firm or plumbing company has little leverage in the insurance market. It generally has far fewer options for customizing coverage and little leverage over the networks, benefit structures and prices insurers offer.
Large employers have many more options. They can hire benefits experts, customize coverage, spread risk across thousands of workers and often self-insure. Their size also gives them leverage with insurers, administrators, pharmacy-benefit managers and provider networks.
AHPs can give small businesses access to some of that same infrastructure. By pooling hundreds or thousands of employers, an association can spread administrative costs, hire professional benefits managers, gain leverage to negotiate better terms and potentially design or self-fund coverage that no individual small firm could build on its own.
Consider the National Association of Realtors. More than a million real-estate professionals belong to the organization, including many self-employed workers and small-business owners. Current federal rules limit its ability to pool that enormous membership into a single group health plan. The Labor Department’s proposal could create a pathway for organizations like NAR to pool eligible members and buy coverage with the clout of a huge employer.
AHPs can also offer greater regulatory flexibility. Obamacare requires individual and small-group plans to cover 10 categories of “essential health benefits.” Large-group plans generally face no such requirement. A qualifying AHP can therefore have more latitude to tailor coverage to what its members actually want to buy.
The evidence suggests those advantages can translate into savings. In 2024, the Congressional Budget Office concluded that lower premiums are the primary reason businesses choose AHPs. An earlier Avalere analysis projected that annual AHP premiums could run $1,900 to $4,100 below average small-group premiums.
Trump tried to expand AHPs during his first term by loosening restrictions on how associations could form and allowing some self-employed workers to participate. The Labor Department cited a Congressional Budget Office estimate that the rule could cover 400,000 otherwise uninsured people. A federal court later invalidated key provisions, and the Biden administration rescinded it.
Now the Labor Department is trying again. The details will matter. But the direction is promising.
For years, Washington has largely responded to unaffordable insurance by subsidizing ever-higher premiums. AHPs represent a different approach—one that can give small businesses more power to negotiate lower costs for their employees in the first place.
A neighborhood restaurant or plumbing company will never have the purchasing clout of a Fortune 500 corporation on its own. But there is no reason federal policy should prevent hundreds of those businesses from joining forces to bargain for a better deal. Expanding association health plans would help them do so.
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