The US labor department’s healthcare plan is a good idea. But it won’t work

(This post originally appeared on The Guardian)

This year, the Trump administration took two significant steps to help small business owners better afford both healthcare and retirement for themselves and their employees. They’re good ideas. But they’re not going to work.

In September, the Department of Labor began allowing businesses to create association health plans. These plans allow companies to form “associations” – or buying groups – that can use a wide definition of membership that includes geographic location or belonging to the same industry. The group would not be subject to the more onerous rules under the Affordable Care Act that effect employers as long as there are more than a hundred employees participating. Although some requirements of the law – such as allowing those with pre-existing conditions to join and not charging different premiums based on health history – are enforced, for the most part employers belonging to those associations can negotiate with the healthcare provider as to which benefits they want to keep and which ones they want to drop from their plans, therefore potentially lowering premiums to their participants – and themselves.

It’s really not a bad idea. If done the right way, a small business can offer a more affordable plan that’s better tailored to the demographics of its employees. Plus, the business can offer this plan along with other plans so that employees have more choices. The administration seems to like the concept so much that the Department of Labor just this week decided to apply it to retirement plans, too.

That also makes sense because there’s a retirement crisis looming in the US. A 2013 American Express survey found that 60% of small business owners weren’t saving the money they needed for retirement, with 73% saying they’re worried about maintaining their lifestyles after they retire. And it’s not just the owners. A recent study from the Pew Charitable Trust found that 41% of millennials – the largest generation of workers in the US – don’t have access to an employer-sponsored retirement plan, and another study found that over 40% of Americans have less than $10,000 saved for when they retire.

To help fix this, the Department of Labor has now proposed rules to allow employers to join together – just like for health plans – and create associations that offer retirement plans. “Although large employers frequently offer retirement plans to help employees save, only 14% of small employers currently offer a retirement plan, according to the General Accounting Office. One study shows that nearly 75% of workers without a workplace plan have no retirement savings – putting their financial security in retirement in serious jeopardy,” the labor secretary, Alexander Acoste, wrote in the Hill. “By joining together to provide retirement plans through an association, small businesses would benefit from the economies of scale that large employers have in providing retirement benefits to employees – lowering costs.”

The association retirement plans proposal is also not such a bad idea. But unfortunately both initiatives suffer from the same fatal flaw: neither are law.

Which means that, even assuming the retirement plan proposal does become effective, the existence of both rulings remain at the whim of whoever happens to be occupying the White House at any given time. And, as we saw with Donald Trump, rulings and executive orders from a prior administration can be changed with the flick of a pen. Already, the legality of association health plans is being contested in court because some believe it violates the Affordable Care Act. It would only be a matter of time before the retirement plan ruling would also come under some form of dispute.

All of this gives small business owners a pause. Do we take this risk? Should we go forward with an association health or retirement plan if both can be so easily contested in a court of law? Does it make sense to invest time, energy and our limited resources into a plan that could be quickly wiped away on 21 January 2021? What happens to the money spent or invested on these plans if they’re suddenly deemed to be obsolete? What do we tell our employees when that happens? And how motivated will our health and retirement brokers be to help us when the end result of these plans are lower commissions, more headaches and the likelihood that both could just disappear in a few short years?

This is what happens when presidents try to implement decent ideas through memos, orders and rulings, instead of getting those decent ideas passed into law. I like the concept of banding together to offer more affordable health insurance and retirement plans for our employees. But unfortunately without legislation, I’m betting that most small business owners will wind up sitting on the sidelines.