This past summer, the Department of Labor (DOL) finalized a regulation calling for the expansion of association health plans (AHPs) for small businesses and self-employed individuals. AHPs are insurance policies offered through an association, often to members within a specific trade, industry, or profession. Among other changes, DOL’s rule loosened the requirements under which a group of employers can join together to form an AHP and become exempt from federal and state small-group or individual market consumer protections. Stakeholders have expressed mixed reactions to the final rule, with some state regulators believing AHP expansion will result in increased access to affordable coverage, while other regulators and attorneys general in at least 12 states have raised concerns about higher premiums in the traditional small-group and individual markets, as well as with AHPs’ history of fraud and abuse.
DOL recently issued additional guidance on AHPs, but there continue to be significant questions about the impact of the final rule, including how many associations will form, the role major medical insurers will play in AHP administration and marketing, and the extent to which AHPs can offer cheaper premiums than plans that must meet federal and state consumer protection standards. With the rule for fully insured AHPs effective on September 1, 2018*, we are starting to see AHPs emerge as groups take advantage of the relaxed requirements.
New Association Health Plans Start to Form
In recent weeks, a scan of news articles identified at least five AHPs that have formed in Michigan, Nebraska, and Nevada as shown in the exhibit below.
Michigan: In Michigan, the Small Business Association and MichBusiness announced that they have banned together to offer an AHP, known as TranscendAHP. The AHP will offer ten plan options that are currently being marketed as large group products, with pricing varying by group size, geography, and benefit design. The association believes members could save 3 to 5 percent in health care costs over the first year, and it is reported that the two businesses comprise roughly “7 percent of the state’s 800,000 small and sole proprietor businesses.” Though limited information is available regarding what benefits the AHP will offer, the association reports that it will cover many of the Affordable Care Act’s (ACA) essential health benefits, but will, at a minimum, exclude pediatric dental coverage.
Nebraska: Nebraska’s Farm Bureau announced that it began offering an AHP, the Nebraska Farm Bureau Health Plan, on October 1 to members that generate half of their income from farming and agribusiness. The Bureau projects that members will save 25 percent in health care costs compared to plans on the individual market, and the plan will be administered by Medica – the only insurer currently offering ACA-compliant plans in the state. At present, the AHP reports that it will cover preexisting health conditions and offer three plan options of varying deductibles and out-of-pocket costs. The Farm Bureau is currently working with agents to sell the new products during its open enrollment, which runs October 1 to December 1. Over 61,000 families are Farm Bureau members in Nebraska. By comparison, approximately 88,000 people are enrolled in Nebraska’s ACA individual marketplace.
Nevada: To date, three AHPs have formed through Nevada’s Clark County Health Plan Association and the Reno/Sparks and Las Vegas Metro Chambers of Commerce. Clark County’s AHP encompasses the Henderson, Latin, and Boulder City Chambers of Commerce and will offer ten plan options through UnitedHealth. The Chambers report that there will be no “narrow benefit plans or skinny plans,” and consumers are guaranteed that their premiums will not increase for two years. Reno and Sparks’ AHP will be powered by Prominence Health Plan, which currently serves chamber employees and will reportedly offer “robust” plan options. Officials estimate that around 650 businesses would be eligible to enroll in the AHP, covering potentially thousands of residents. Finally, the Las Vegas Metro Chamber has partnered with Anthem Blue Cross Blue Shield to offer “robust benefits and coverage” through brokers, beginning October 1. No plan details have been released yet for any of the AHPs.
|State||Association / Chamber||Insurer||Service Area||Effective Date||Does insurer sell medical coverage in the ACA marketplace?|
|Michigan||Small Business Association of Michigan & MichBusiness||BlueCross BlueShield of Michigan & Blue Care Network||N/A||10/8/18||Yes|
|Nebraska||Nebraska’s Farm Bureau||Medica||Statewide||10/1/18||Yes|
|Nevada||Henderson, NV Chamber of Commerce / Clark County AHP||Health Plan of NV, Sierra Health and Life (UnitedHealthcare)||Clark County||9/1/18||Yes|
|Nevada||Reno/Sparks Chamber AHP||Prominence HealthFirst||Washoe County||10/6/18||No|
|Nevada||Las Vegas Metro Chamber of Commerce Health Plan||Rocky Mountain Hospital and Medical Services (Anthem Blue Cross and Blue Shield)||Statewide||10/1/18||No**|
**Anthem Rocky Mountain sells dental coverage through the marketplace.
While the final rule has been effective for only a few weeks, associations and insurers are already taking advantage of the flexibility granted to form AHPs. These new arrangements leave us with several questions:
- What benefits and services will these forms of coverage provide? Some AHPs report that they will cover certain essential health benefits or preexisting conditions, but none have released plan details so far.
- How much will the plans cost and how many individuals or businesses will actually enroll? Some of the AHPs report that members could save anywhere from 3 to 25 percent in health care costs, but have yet to publish plan premiums or how they could vary based on rating factors such as age or gender. Some, like the Farm Bureau in Nebraska, have a large population of potentially eligible enrollees to whom they will target marketing. Whether individuals and businesses will gravitate towards the arrangements remains to be seen.
- How many more AHPs will form? After the DOL rule was finalized some major trade associations, such as the National Federation of Independent Businesses (NFIB), concluded that the DOL’s new rules for AHPs, which included a provision prohibiting discrimination based on health status, were still too onerous. However, other organizations, such as the ones described above, clearly believe they can attract sufficient enrollment among healthy groups and individuals to maintain a viable AHP.
- What role will major medical insurers play in AHP growth? So far, all of the emerging AHPs have turned to a major medical insurer to administer their plans. One of the concerns with AHPs is that they will siphon healthy risk from the individual and small-group market risk pools. If an insurer is participating in the ACA marketplace in the state, it could make sense for them to back an AHP in order to hang on to those healthier enrollees. However, if an insurer is not participating in the state’s ACA marketplace, but opts to back an AHP anyway, they may pose a threat to their ACA-compliant competitors. These dynamics suggest that over time, more insurers might be incentivized to support AHPs in order to maintain their competitive edge in the market.
*The new rules are effective for existing self-funded AHPs beginning January 1, 2019 and to newly formed, self-funded AHPs beginning April 1, 2019.