Employers: Questions on the future of Association Health Plans

In the healthcare world, President Trump’s dislike for the Affordable Care Act (ACA) is well documented and while his initiatives to overthrow the ACA in its entirety have failed, his plans to undermine the ACA are ongoing.

One such initiative includes expanding the use of Association Health Plans (AHPs). AHPs have been around for years but have always been a challenge for both insurers and the insured due to complex federal and state rules and risk. As AHPs are not considered individual or small group insurance, this type of plan would not have to comply with the full range of ACA insurance mandates.

In response to a 2017 executive order from President Trump, the Department of Labor passed a rule that loosened restrictions around the formation of new associations—allowing associations to be formed for the purpose of providing health insurance. It also allowed AHPs to form across state lines.

These efforts have been challenged by multiple states that have argued the expansion of these types of plans violate ACA consumer protection clauses. The DOL rule, and the resulting lawsuits, raise several questions about the future of AHPs.

Yet, early indications are positive, with new AHPs offering generous benefits and lower premiums than other plans on the Individual Market.

Understanding AHPs
In their simplest form, AHPs can be seen as a health plan alternative, one that allows individuals and/or small businesses to band together to buy group health insurance and take advantage of economies of scale. This can allow buyers — particularly small businesses — a less costly means to acquire health insurance.

AHPs are exempt from many of the ACA mandates. For example, AHPs are not required to cover the Essential Health Benefits that individual and small group insurance must cover under the Affordable Care Act. These include maternity care, mental health and other benefits.

The result is a plan that can be less costly to individuals or small employers. But the catch is those who enroll may be unaware the plans lack comprehensive coverage. As such, AHPs remain a polarizing political topic.

Executive orders and lawsuits
A lawsuit, filed July 26 on behalf of 12 different states, in the Washington, D.C., District Court of Appeals argued that the wide array — and continual expansion — of AHPs violated the ACA’s inherent consumer protection clauses.

This exclusion from the ACA, the attorney generals for the 12 states in question argue, could allow AHPs to discriminate against potentially higher cost insurance coverage cases in an effort to control costs. There is also concern that healthier consumers could leave ACA markets to attain more affordable coverage found through AHPs.

In January, the attorney generals argued that the prevalence of AHPs will boost instances of fraud while leaving many people with little or no health insurance. The judge heard more than two hours of testimony from both sides and promised to issue a ruling quickly with opponents of AHPs pressing for April 1, 2019.

Questions to consider on the future of AHPs:

1. Should small employers consider AHP plans? How about large employers?
This poses an interesting question, particularly in today’s competitive job market. Can your company retain top talent with a less robust health plan?

A more cost-effective plan delivered through an AHP may sound appealing for small employers. Yet, if such plans sacrifice employee protections and deliver unexpected surprises to employee benefits packages, the savings may be a trade of you don’t want to make.

Large employers that are subject to ACA requirements must offer a plan that meets minimum value and affordability requirements under the law, even if the coverage is provided through an AHP type of plan.

So your decision may come down to the level of control you want over the plan, administration, costs and risk.

2. Will AHPs be a valid healthcare solution for contractors?
Independent contractors are a growing segment of the labor market representing one in five jobs in America. If the DOL rule is upheld, AHPs may offer an alternative to the individual market for your contract employees. AHPs make it possible for independent contractors within a trade or geographic area, the ability to form their own association plan. If contractors are important to your business, AHPs are something to watch.

3. Will AHPs thrive if the DOL rule is upheld?
The answer to this question depends on how states and insurers will respond to the rule. AHPs have been around for years and haven’t gained much traction among states and insurers mainly because of complex rules and risk. Because the states themselves are regulators of what is offered within their borders, it remains unclear how many states will even allow AHPs to operate within them.

And for the states that allow AHPs, it’s unknown what changes they will require in response to these new regulations.

4. Will AHPs impact cost of insurance overall?
It’s hard to say. Some experts say AHPs will add more competition to the health plan marketplace, which could drive costs and potentially premiums lower. Others say they will drive up costs by attracting healthier individuals from the individual small group insured market, resulting in risk pool destabilization.

Uncertainty remains
While the future of AHPs remains unclear, it is clear that the Trump Administration will continue to push the agenda to weaken the ACA forward. Employers should continue to keep an eye on the changes and the potential impact they may have on your organization’s health plan strategy and offerings. We can help. Follow us on Twitter or LinkedIn and we’ll keep you updated!

February 28, 2019