New Georgetown-Society of Actuaries’ Report: Estimating the Impact of Association Health Plans on the Individual Market

The U.S. Department of Labor is expected to finalize proposed rules expanding association health plans (AHPs) very soon. When multiple Congressional efforts to repeal and replace the Affordable Care Act (ACA) did not succeed in 2017, the Trump administration responded by using its administrative authority to relax ACA rules and  encourage the expansion of alternative coverage options such as AHPs, which would be exempted from key ACA protections such as the essential health benefit package and adjusted community rating standards.

The administration argues that AHPs will provide less expensive, albeit less comprehensive, coverage for small employers and individuals. Critics argue that AHPs are likely to be attractive to a healthier and younger population, leaving an older and sicker population in the ACA-compliant individual and small-group markets. This in turn could result in higher premiums and fewer plan choices.

In a new study published in The Actuary, authors Sabrina Corlette, Josh Hammerquist, and Pete Nakahata provide an overview of the federal and state regulatory framework for AHPs and attempt to quantify the effects of an expansion of the AHP market on enrollment and the health of the risk pool in the ACA-compliant individual markets.

They estimate that:

  • Up to 10 percent of the individual market (on- and off-exchange) will leave ACA-compliant plans for AHPs.
  • On average, individuals leaving for AHPs will be up to 54 percent healthier than individuals remaining in the ACA-compliant market, resulting in a 4.4 percent increase in average claims.

The bottom line? AHP proponents are correct that younger, healthier individuals are likely to find less expensive plan options through AHPs, especially if they are not eligible for the ACA’s premium subsidies. But reduced enrollment and higher claims costs in the ACA-compliant market will lead to higher premiums for the individuals who remain there.

For more detailed projections of both on- and off-exchange enrollment and morbidity changes, read the full article here. The article was commissioned by the Society of Actuaries and made possible thanks to the generous support of the Robert Wood Johnson Foundation and Altarum Institute.

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