Indiana Association Health Plans (AHPs)
Association Health Plan is where members can purchase health insurance that is specifically designed for that organization.
At the end of 2017, President Trump issued an executive order that would allow for group of people to purchase associations health plans that are not required to cover the essential health benefits (EHBs) of the affordable care act (ACA). The proposed rule would broaden the criteria for determining which employers can band together to form AHPs.
The proposal rule would allow employer to join to form an AHP that is considered a single ERISA plan.
- The employers are in the same trade, industry, or profession
- The employer has a principal place of business within a region that does not exceed boundaries of the same state or metropolitan area.
- The rule would allow working owners sole proprietors and other self-employer individuals join the AHPs.
Critics of the proposed rule have concerns that the AHP will have a negative impact on existing ACA small group and Individual markets. Their concern is valid as most employers would look for a better deal than what the ACA group plans offer. What the so-called critics don’t understand, is these groups are already flocking to non-ACA plan through the self-funded market. Indiana small group with just five participating employees are eligible for a self-funded plan which can have a 30% savings against a ACA small group. As for the individual markets, those blocks of business are already in a death spiral with rates skyrocketing every year.
The AHPs would require members to meet some of the following conditions.
- The group or association has a formal organization structure with governing body and bylaws.
- The group or association exists for the purpose in whole or in part for sponsoring a group health plan that is offered to its members.
- The group or association’s members employers control its functions and activities, including the establishment and maintenance of the group health plan.
- Only employee of the employers may participate in the group health plan which is sponsored by the association.
The AHPs would have to comply with certain nondiscrimination requirements. These set of rules would prevent AHP’s from restricting membership based on health factors.
Indiana has seen it’s fair share of AHPs over the years prior to the Affordable Care Act. The current association plans have concerns over the new rules as it may impact them negatively. The biggest concerns are medical underwriting or health discrimination. If the new rules do not allow AHPs to underwrite then they lose the most effective cost containment tool. Then we could see the current associations, unless grandfathered in, fall into adverse selection or death spiral. Then once again we can witness the power of the government when it comes to healthcare reform.
Brining an AHPs health plan to market has huge barriers to entry. Usually the highest health utilizers are the ones that want to create the AHPs. With starting a small AHP’s it only takes a few large claimants to prevent the success. Most insurance companies will want to underwrite the risk, without claims data it is almost impossible to get receive competitive pricing.
One of the rules on for AHPs is that an insurance company cannot sponsor the health plan. This can be interpreted a lot of ways, but this prevents a carrier from developing a template type association health plan. The association, consultant, broker would be the ones to develop the health plan. This could create opportunities for a broker like Nefouse & Associates to develop an AHPs for Indiana.
Once there is more clarification of AHP’s rules and regulations, we could see an new health insurance option become available.