Association Health Plans – Will They Help?

The Trump Administration has released its final rule on Association Health Plans (AHPs). This has been a long-debated topic. Advocates feel that groups in the same trade, industry, line of business or profession – or those that exist within the boundaries of the same state or metropolitan region – should be able to band together to have the same bargaining clout as large employers do when purchasing insurance. Detractors believe that these rules will draw preferred (or healthier) risk from the public exchanges or small group risk pools and make insurance for those remaining more expensive.

The rules provide that these new aggregated groups are exempted from individual and small group health insurance regulations, such as coverage for essential health benefits and modified community rating. Sole proprietors and independent contractors would also be allowed to join these new AHPs.

Anti-discrimination provisions which prohibit medically underwriting risks will apply to AHPs. Thus, the AHP would be barred from excluding any group from coverage because of claim costs and further would not be allowed to vary premiums based upon claim costs. Associations would also be subject to state Multiple Employer Welfare Arrangement (MEWA) rules and existing financial and reporting requirements, as well as other restrictions on these plans. These rules, which were created due to financial misconduct of certain such entities in the past, will make it very difficult to offer a self-insured MEWA in some jurisdictions. Insurance carriers have been lukewarm to the idea of Association Health Plans and they may be reluctant to accept risks for which they cannot underwrite as known populations – and also unwilling to cannibalize their existing business at a lower cost.

New AHP-sponsored fully-insured plans can be implemented September 1, 2018 or later and new self-insured plans April 1, 2019 or later. Existing self-insured AHPs can implement the new rules effective January 1, 2019. The Congressional Budget Office (CBO) has estimated that by 2023 four million Americans will join AHPs, including 400,000 who were previously uninsured. No word on what impact to the ACA exchanges CBO expects, but no doubt insurance carriers already skeptical of those markets will be worried. Just how much anti-selection can insurers subject themselves to before abandoning these markets all together?

Ironically, most of the impact from selection which drives up cost will find its way back to government-provided premium subsidies. That’s the issue with healthcare – pushing one lever surely will move a lot of other levers and it is difficult to predict the ultimate outcome. One thing is certain – these new AHP rules and those issued for short-term medical policies will increase confusion.

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