Association Health Plans

Association Health Plans

The History

In the late 1990s 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 lower cost with 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 almost made AHPs extinct.

In October 2017, the Trump administration signed an executive order that would broaden access to AHPs. The idea is still the same - expansion of association health plan will enable small business (EMS provider services) to come together at an association level and pool their employees as a group to take advantage of the additional value and reduced administrative expenses enjoyed by larger employer group plans.  

What is an Association Health Plan exactly?

Under the current federal AHP regulations, an AHP is a group of the employers who must meet a "commonality" standard, meaning that they have something in common other than just wanting to provide health coverage such as AARP.

Each employer can offer different benefits packages and premium structures but premiums are not based solely on the health status or claims history of each group individually. However, the premiums 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 on 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 insurer’s products.
  • Association established by a Professional Employer Organization (PEO).
  • Multiple Employer Welfare Arrangement.
  • ERISA Association Health Plan.

How does 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 market or the small-group market. In other words, the coverage must comply with the ACA’s protections for people with preexisting conditions and benefit standards as well as any applicable state rules.

So, what’s next for AHPs?

For an insurance market to work effectively, insurance companies must 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 lead to increased risk of fraud and insolvency, the loss of some state consumer protections, and higher premiums and fewer plan choices for people who need health care services.

This isn’t ultimately 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 with risk to the consumers? Too early to predict but more change is ahead as the state and federal governments attempt to wrangle one of the most challenging issues of modern America.

It seems like providing insurance coverage through an AHP for WEMSA members should be relatively simple. However, the troubled history of AHPs, the rules, restrictions, and requirement that all service providers band together and act like one employer is an enormous obstacle to overcome. It is not insurmountable, however. Very recently, there are currently two large associations in Wisconsin who have been successful at implementing an AHP for their members. WEMSA is exploring the pros, cons, options and viability of providing an AHP for our members. The process is complicated and uncertain and I will provide updates as we move forward.

Author: Marc Cohen, Executive Director, WEMSA

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