This article is based on key take-aways from the WSAE Association Health Plans webinar on October 2, 2018, and is reprinted from VantagePoint magazine, the quarterly publication of WSAE. If you are interested in accessing the webinar recording, please visit www.wsae.org>Events>Webinar Series, and click “Self-Paced Online Seminars” near the bottom of the frame.
Association Health Plans (AHPs), under the Department of Labor's rule, are group health plans that employer groups and associations offer to provide health coverage for employees.
In short, AHPs are groups of self-employed individuals that “band together by geography or industry to obtain healthcare coverage as if they were a single large employer,” according to the U.S. Department of Labor (DOL).
The history of AHPs
Decades ago, federal legislation had been proposed to create federally-recognized Association Health Plans (AHPs). Small businesses such as dairy farmers, car dealers and accountants created AHPs to buy health insurance with the aim of achieving lower costs through a larger pool of enrollees. Over time, many of the AHPs filed for bankruptcy, and, as a result, sweeping changes were mandated in the 1990s that rendered AHPs all but extinct.
In October 2017, the Trump administration signed an executive order that would broaden access to AHPs. The idea is still the same—enabling small businesses to come together at an association level to pool their employees as a group to take advantage of the additional value and reduced administrative expenses enjoyed by larger employer health insurance plans.
What is an AHP, exactly?
Under the current federal AHP regulations, an AHP is a group of employers who must meet a commonality standard. This means they have something in common other than just wanting to provide health coverage, like AARP.
Each employer can offer different benefits packages and premium structures. Premiums are not based solely on the health status or claims history of each group individually, but can be based on the overall pool of covered individuals across all participating employers and adjusted periodically.
An AHP may be established within a single state and based on the most recent legislation nationwide. If fully insured, they are subject to the insurance laws of the state in which they are established. AHPs may take one of the following forms:
- Professional or trade association offering health insurance as an incidental benefit of membership
- Captive association of an insurance company used to market the insurer’s products
- Association established by a Professional Employer Organization (PEO)
- Multiple Employer Welfare Arrangement
- ERISA Association Health Plan
How does the ACA apply to Association Health Plans?
Under current federal law, health insurance policies sold through associations operate under the same federal and state standards that apply to the individual or small-group markets. In other words, the coverage must comply with the Affordable Care Act (ACA)’s protections for people with preexisting conditions and benefit standards as well as any applicable state rules.
Pros
- Offer very competitive employee benefit options, in terms of both price and design
- Represent a strong member benefit for the employer
- Serve as an association’s non-dues revenue source
- Meet all compliance requirements
- Can be tailored for each association
- Simplify key administrative functions outsourced to trusted expertise
- Consolidate billing and trust services
Cons
- Must meet a number of tests
- Might strain employer/employee relationship
Action steps to consider
- Survey your membership
- Discuss with your board
- Understand the local offerings/plans
- Talk to an administrator expert
- Review the differences between sponsoring and endorsing
- Evaluate the investment and return
- Complete a Request for Proposal
- Select trusted/reputable partners
So, what’s next for AHPs?
For an insurance market to work effectively, insurance companies must all operate by the same set of rules. Federal administrative changes that allow some health plans to bypass state and federal rules, but not others, create an uneven playing field, destabilize insurance markets and put consumers at risk. Past experience with AHPs demonstrates that they can lead to increased risk of fraud and insolvency, the loss of some state consumer protections, higher premiums and fewer plan choices for people who need health care services.
Ultimately, this isn’t a new idea but a new version of an idea that has been around for more than 25 years. Will it be the cure-all for small employers seeking a way to control their health care costs? Or will it create market destabilization, putting consumers at risk? It is too early to predict, but more change is ahead as the state and federal governments attempt to wrangle with one of the most challenging issues of modern America.
Two Wisconsin associations that have successfully set up an AHP for their members are Wisconsin Bankers Association (WBA) and The Wisconsin Manufacturers and Commerce (WMC). If you are looking to explore this option as a member benefit for your association, you might want to get in touch with United Health Care. Although they only cover 53 of Wisconsin’s 72 counties, they are a large provider and are experienced, having put together the plans for the WBA and WMC.