Small employers get cheaper health plans—but at whose cost?
S. 1847 — Association Health Plans Act · Filed by Rand Paul (R-KY) · 6 cosponsors · Introduced May 21, 2025 · Referred to committee
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What it does
This bill amends federal labor law to allow groups or associations of employers—including self-employed individuals—to band together to offer health insurance as a single entity, bypassing some state insurance regulations. The bill lets these association health plans use modified community rating (pooling claims across members) and risk-adjust premiums by employer, while maintaining federal protections against discrimination based on health status and pre-existing conditions. The stated intent is to expand affordable health coverage options for small employers and self-employed workers.
Why we flagged it
The bill's core mechanism is to create a new class of health plans that operate under federal ERISA rules while potentially evading state insurance regulation, solvency requirements, and consumer protections. This is regulatory arbitrage, not a straightforward expansion of coverage.
What the text implies
- Association plans may attract younger, healthier members, leaving traditional small-group and individual markets with older, sicker pools and higher premiums—a form of adverse selection that harms those left behind.
- The bill allows risk-adjustment by employer member, meaning sicker employers pay higher premiums within the same plan, potentially pricing out small employers with older or less healthy workforces.
The full analysis lists 5 implications of this text.
Who stands to gain
health insurance companies (through reduced state regulation and new market segments); third-party administrators and brokers (managing association plans); large employers (who can form associations to reduce per-employee costs)