Association Health Plans (AHPs) once allowed small businesses and the self-employed to band together to purchase insurance, giving them access to the economies of scale, negotiating power and lower premiums typically reserved for large employers. Although these plans have since been significantly curtailed, proposed legislation — the Association Health Plans Act — seeks to reverse that trend by expanding access again. A revival of AHPs would offer more choices and introduce meaningful competition into a stagnant health insurance market.

AHPs were once far more accessible, but that changed with the passage of the Affordable Care Act, which required many AHPs to comply with coverage requirements that drove up AHPs’ costs. However, the ACA exempted certain groups — primarily professional associations and unions, allowing them to continue offering plans without meeting all ACA requirements. As a result, AHPs that were not exempted started to disappear.

In 2018, President Trump attempted to expand eligibility for AHPs through regulatory action, but the effort was overturned in court after some states challenged the administration’s legal interpretation of the term “employer.”

Despite the legal setback, the economic rationale behind AHPs remains strong. These plans offer multiple benefits to employers and consumers by increasing their health insurance options. Through simple voluntary association, small businesses, gig workers, and sole proprietors gained negotiating power comparable to large firms. According to estimates from the Congressional Budget Office and Joint Committee on Taxation, AHPs could reduce small-group premiums by 30%.

Other research confirms similar savings for comprehensive coverage. When eligibility was expanded briefly in 2018, projected savings on premiums ranged from $1,900 to $4,100 in the small group market, and $8,700 to $10,800 for individual plans.

Critics argue that AHPs may segment the market by attracting healthier people, thereby undermining ACA risk pools and increasing costs for sicker enrollees. However, proposals for AHPs explicitly include nondiscrimination provisions and protections for individuals with pre-existing conditions, preventing insurers from selectively covering only low-cost groups. AHPs can provide true competition for ACA plans and can drive down costs across the board.

While the limitations imposed by the ACA cannot be undone by executive order, Congress has the power to repeal them. Reforms like the Association Health Plans Act would be a good start.

Expanding exemptions from ACA small-group mandates would reduce regulatory costs for small employers, making coverage far more affordable and more customizable.

Congress has a chance to restore a path to affordable, flexible health coverage for millions of small-business owners and independent workers. AHPs aren’t a loophole — they’re a tool to level the playing field.

Justin Leventhal is a senior policy analyst for the American Consumer Institute/InsideSources