Association Health Plans: What You Need to Know About the New Rule

 

by Paul Rooney, Managing Partner

If you own a small business, you may be intrigued by the expected expansion of Association Health Plans under a new rule that got a stamp of approval from the Trump administration this spring. Will they meet your needs or the needs of your employees? Can they save you money?

Those are important questions for small businesses and self-employed professionals who struggle to buy affordable insurance for themselves and their workers.

Association Health Plans (sometimes called AHPs) allow small businesses to band together to buy insurance. Some plans have been in place for years, and those plans can continue to operate after the new rule takes effect. But the Trump administration’s regulation loosens the rules for additional plans to come onto the market, allowing more small businesses, including individuals who work for themselves, to join these plans.

What Makes This New Rule Different?

In contrast to earlier AHPs that generally required an association’s members to share an economic or other common purpose beyond enrolling in health insurance, new AHP members can be connected by geography alone or by business and professional interests. And under the new rule, providing members with insurance can be the main purpose of the AHP.

Our take at EBS

The bottom line, based on our read, is that the final AHP regulations are much less disruptive than (a) they could have been, and (b) Trump said, and continues to say they are (he was touting that employers were already saving millions, but the new regulations didn’t take effect until September 1, 2018). The reason for that boils down to the fact that the AHP regulations do NOT supersede state regulations. Therefore, in Massachusetts, merged market rating rules and Minimum Creditable Coverage (MCC) regulations continue to apply. A bunch of small groups cannot band together to become one large group and be rated as such. They could form an Association, but their rates would still be based on their own group’s size. Additionally, Massachusetts small groups could not band together with another state’s AHP. Because they reside in Massachusetts, they will fall under Massachusetts rules. There’s no magical path to huge premium savings.

Another option for “banding together” that Massachusetts has used is the forming of a cooperative (not to be confused with the ACA’s co-ops such as Minuteman Health), which could benefit from a co-op rating factor at the discretion of the health plan. The Retailers Association of MA is an example of that. But, also thanks to the ACA, co-op rating factors are no longer allowed and will be fully phased-out in Massachusetts by 2020. Again, no silver bullet for premium savings.

It will be interesting to see what activity there is in other states that are not as highly-regulated as Massachusetts. From an actuarial/underwriting perspective, it’s a relief to know that Massachusetts maintains state authority, as this could have caused a chaotic selection spiral.

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2 responses to “Association Health Plans: What You Need to Know About the New Rule

  1. This is an excellent summary of a complex topic. The key point, which you emphasize, is that states still have broad discretion to regulate AHPs. AHPs will be an attractive option in many states that encourage more consumer choice. They’ll be little different from traditional coverage in states like Massachusetts that regulates heavily. And those who jump into this pool – groups that organize AHPs and employers who choose coverage through them – will always be at the mercy of the next gubernatorial, state legislative, or presidential election, when the rules at the federal or state level could change abruptly. Administrative orders like this are written in sand, and the tide can erase them at any time.

    1. Thanks William for your insight here and for taking the time to comment on our blog post about AHPs.Agreed, as the consumerization of benefit plans continues to mature, we’re curious how this conversation will evolve. – JM

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