Association Health Plans: What Do New Guidelines Mean for Healthcare?

Jul 16, 2018
| Anissa Kurtz
Association Health Plans

Back in October, President Trump signed an executive order intended to help make healthcare more affordable to individuals and small employers.

This executive order marked the administration’s continued efforts to undo aspects of the Affordable Care Act (ACA).

It also encouraged the use of Association Health Plans (AHPs) on a much larger scale (county, state, region, or even nation-wide) to potentially lower the costs of healthcare for individuals and smaller businesses. At the time, the President directed the Labor Department to study how to make AHPs a feasible option.

On June 19, the Department of Labor (DOL) released the final rules allowing small businesses the freedom to purchase health insurance in the large group market or to self-insure through a benefit arrangement or Association Health Plan (AHPs).

What Are Association Health Plans and How Do The New Rules Impact Healthcare?

Association Health Plans are a type of multiple employer welfare arrangement (MEWA) where small businesses join together and are treated as a single plan under the Employee Retirement Income Security Act (ERISA) for the purpose of purchasing and offering employees health insurance.

Currently, the criteria that must be satisfied under ERISA for a group of employers to sponsor a single plan is very narrow. As a result, most multiple employer health plans are treated as a collection of plans with each employer a separate sponsor. The size of each employer then determines whether the coverage is subject to small or large group rules and/or compliance with the ACA.

However, the final rules expand the guidance providing small employers with a greater ability to join together and form an AHP and purchase health insurance as a single employer. When this happens, all of the covered employees are considered when determining the insurance market rules that will apply (i.e. small or large group, ACA etc.).

What Concerns Are There with Association Health Plans?

While proponents of AHPs say that they will allow small employers and individuals to obtain quality healthcare at a lower cost, others say they will do more harm than good.

One concern is that AHPs will hurt the small-group market, especially if businesses with younger, healthier employees choose them over ACA or small group plans. This would leave businesses with an older workforce with fewer options at much more expensive prices than currently exist.

Additionally, some critics feel that because AHPs are not required to comply with some provisions of the ACA, they will not have to offer certain core coverage items and services (like mental health parity) and they will be allowed to base premiums on factors such as age and gender.

Another major concern is the potential for a rise in insurance fraud with association health plans. AHPs have been around for a long time, and in the past have had issues with operators who take advantage of various aspects of these plans. Some complaints have led to civil and criminal lawsuits at both state and federal levels.

By making AHPs more attractive and easier to use, opponents say that fraud is more likely to occur.

Some states are also opposed to association health plans becoming more popular. New York and Massachusetts have said they will sue the Trump administration, saying that AHPs will "invite fraud, mismanagement and deception."

What’s Next for AHPs, the Affordable Care Act, and Healthcare?

The new rule does not affect current Association Health Plans. They can continue to function as they do currently or follow the new requirements.

Fully insured plans can begin operating under the new rule on September 1, 2018. Existing AHPs can begin operating under the new rules on January 1, 2019 and new AHPs can begin on April 1, 2019.

It will take some time before the full effects of these plans on the Affordable Care Act and Healthcare as a whole are known.

Additionally, another Trump administration proposal around short-term insurance plans is expected sometime over the summer. These plans, which are currently capped at a 90-day limit, are expected to now be sold for up to one year.

Short-term plans would further impact the Affordable Care Act as an alternative healthcare option. And since they don’t have to meet ACA regulations, they can offer significantly less coverage at much lower prices.

These new rules are creating even more uncertainty with the Affordable Care Act and healthcare. There should be more news coming over the next several months.

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