The Trump Administration and the United States Department of Labor (DOL) announced new rules for Association Health Plans (AHP). The new rules allow insurance carriers to expand access to the market for fully insured plans beginning September 1, 2018, and on January 1, 2019, for self-funded plans.
What are AHPs?
AHPs are group health plans that employer groups and associations offer to provide health coverage for employees. These plans exist today, and existing plans may continue after the new rule takes effect. The new AHP rule brings additional plans into the market, allowing more small businesses and sole proprietors to join together to create an AHP by either purchasing large group or self-insuring coverage. Business owners with no employees and small businesses that have employees will have access to these plans, and AHPs will now be able to cross state lines. Many AHPs will most likely choose to self-insure, which further reduces regulatory burden since self-insured plans are not subject to state insurance regulations.
A small group is defined in Ohio as having less than 50 employees. Local business groups and industry groups nationally will be able to band together, which will allow the insurance risk to be spread out over a larger group. Spreading out the risk over larger pools gives small businesses access to health coverage at a lower premium, which was only afforded to large groups in the past.
Large group plan underwriting guidelines are much less restrictive than the small group and individual plan rules. Less restrictive coverage would likely attract healthier people and the combination of reduced benefits, healthier enrollment, and administrative costs being spread across a larger group would generally result in lower premiums for an AHP. AHPs as a large group will have better leverage to negotiate premiums as compared to small group and individuals that are set by the insurance industry.
AHP rules available to small groups:
- For the sole purpose of obtaining health insurance
- Same geographically located industry and businesses
- Members of chambers of commerce and nationally affiliated trade industry groups
- Sole proprietors and non-employer firms
The new rule would give small businesses access to coverage as an alternative to the ACA market.
Number of Businesses and Associations
According to the 2016 U.S. Census Bureau’s Annual Survey of Entrepreneurs, there were 5.6 million employer firms. Employer firms with less than 20 employees made up five million firms and there were 24.8 million non-employer firms. The number of non-employer firms added to the firms with less than 20 employees equals nearly 30 million firms.
In January of 2015 The Power of Associations states, “In 2013, there were 66,985,501 organizations on file with the IRS. This subsection includes chambers of commerce and the majority of the trade associations and professional societies operating in the United States today. Associations are found in every state and territory in the country.”
Considering the number of small firms along with the number of associations that exist in the U.S., the expansion of AHPs has the potential to impact a large number of people.
New Rules/Pre-Existing Conditions
The Affordable Care Act (ACA) requires AHPs that sell health insurance plans to small employers and individuals and small employers must meet the same standards that the ACA applied to these respective markets. The ACA outlined certain essential benefits that have to be included in health insurance plans, including preventive care, ambulatory services, emergency services, hospitalization, mental health services, maternity care, prescription drugs, rehabilitation, laboratory services, and pediatric care. AHPs are exempt from these regulations and may not cover some of these services.
AHP new rules:
- Do not have to include the ACA’s 10 essential health benefits for plans in the individual and small group market, businesses with fewer than 50 employees
- Allows different premium rates based on age, gender, and location; charges can vary by industry
- Does not allow discrimination based on health status
- Cannot deny coverage or charge more because of pre-existing
- Cannot cancel coverage due to an employee’s illness
- Can vary charges, higher rates for high-risk industries compared to low-risk industries
- Allows dependents on the plan until they reach age 26
- Cannot charge older applicants more than three times as much as younger applicants
- Must cover at least 60 percent of average medical costs
- Subject to the ACA’s risk adjustment program for small group and individual plans
- Sole proprietors and non-employee firms can get coverage for their family
- Does not change or affect any existing association health plans
- Requires AHP to elect a governing body
- Effective dates for the new rule are September 1, 2018, for fully insured association plans and January 1, 2019, for self-funded association plans
Providing health insurance as a small business owner can be costly when balancing between growing their business and attracting new talent. The new rules and expansion of AHPs provide small businesses with the opportunity to offer health insurance at lower premiums, giving them the same kind of flexibility that large companies have when selecting a health insurance plan. AHPs can lower health insurance premiums because they are exempt from covering the 10 essential health benefits required by the ACA and the law allows for more flexibility in the way AHP premiums are set. Even though AHPs will most likely have lower premiums, it is important to remember the benefits plan options may not be the same as those in other more expensive health plans. With many small businesses facing rising premiums, having access to a more affordable coverage alternative in AHPs is a viable solution
It is important to research and understand the options before purchasing any health insurance plan, including an AHP. Even though the selection process can be time consuming, the investment is worthwhile to ensure the right health insurance plan is placed. Working with an experienced health insurance broker or consultant can be beneficial, saving both time and money when navigating the selection process.
If you need additional information about AHPs, the experts at Cornerstone can help. We have extensive experience working with AHPs and with understanding the positive impact of the new rules. Please ask your local Cornerstone representative about the available AHP plans offered through our contracted health insurance carriers.