The year was 1974, the place was Racine, Wisconsin, and I remember like it happened yesterday. Having spent a couple years working in corporate America right after getting married, I was entering into the world of independent consulting. Self-employment. One could reasonably surmise that I was too inexperienced and naive to understand the potential pitfalls.
We were young, ambitious, and seeking an opportunity for a brighter future, which included having a family. Self-employment was risky compared to corporate life, but we were aggressive and confident, so we took the plunge.
Fortunately, Sarah was teaching in the public-school system, and was covered by a large group insurance policy. When child number one came along (you know him today as Adam), our medical expenses were largely covered. Then, Sarah and I made the “big decision” to raise our children at home, by and with their parents. No more school district health insurance coverage once employment stopped.
In 1976, everyone had health insurance, right? Not so much for the self-employed, it turned out. Bye-Bye, group insurance. That constituted both a problem and a learning opportunity. Certainly, it would be easy to join some small or medium size insurance-buying group, right?
No! Small group coverage was not available to someone who, like me, was a one-person business, so we became advocates for change in the insurance industry. Only after a long learning curve did we conclude that this was not an insurance industry problem, but rather a problem in the law. This situation was a catalyst for my lifelong study of personal financial planning. For decades we advocated for Congress to figure out how to allow individuals and small businesses to form groups for health insurance coverage. These groups should be able to be formed across state lines if necessary. Congress and several Presidents continually turned a deaf ear to the problem.
We both reached Medicare age prior to our dream coming true, but I am pleased to report that the Administration has at long last taken a giant step toward solving the problem. President Trump signed an Executive Order in October, 2017, and the Labor Department recently finalized sweeping reforms in the group insurance arena. Now, people who are self-employed, and people in very small businesses who have some common thread, are able to band together in groups to buy health insurance at group rates, and even across state lines.
“Association Health Plans,” or AHPs, are expected to improve insurance options for small businesses and individuals, creating buying power through pure group size. AHPs are expected to affect 4 million Americans, saving thousands of dollars each, while improving coverages.
The fundamentals of insurance include the basic premise of risk sharing. The fundamentals of capitalism include the basic premise that competition is good. Pooling risk among more and more people lessens overall cost by lessening individual risk. There truly is strength in numbers, and nowhere is that more accurate than in the world of insurance. Larger groups result in lower rates per group member. Similarly, more potential insurance carriers competing for the small business market lessens cost. How simple can it get?
Without complaining how long it took to get here, I am thrilled by the announcement, though it is too late for me to take advantage of the new rules. Most job creation in this country takes place in small business. Over the past several years, more businesses failed than were created. Resultant job losses served no one very well and added to the uninsured rolls. Expect that situation to improve.
On a final note, creation of AHPs is expected to further weaken ObamaCare. That is good news.
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