Cautiously Navigating Association Health Plans: What Small Employers Can Expect
The Department of Labor (DOL) recently expanded access to Association Health Plans (AHPs) as a result of the presidential executive order "Promoting Healthcare Choice and Competition Across the United States." Stamped with approval in mid-June, AHPs are designed to level the playing field for small-business owners coping with rising insurance premiums under the Affordable Care Act (ACA).
In recent years, the percentage of small businesses offering healthcare has dropped dramatically, and premiums for self-employed individuals have more than doubled. Touted as a form of relief, AHPs make it easier for groups of people, small employers and even sole proprietors and their families to band together based on geography or by business/professional interests to attain many of the advantages traditionally reserved for large employers.
However, with the new plans subject to fewer regulations, critics counter AHPs offer decreased benefits and consumer protections, and may also result in higher premiums for those who need comprehensive insurance by siphoning off healthier people who opt for less coverage. Many states, including New York and California, are actively fighting the new rule, signing letters of opposition claiming AHPs open the door to what they deem "junk health insurance." So, if you're considering an AHP for your business, here are a couple key factors to keep in mind.
The good, the bad and the ugly
With plans slated to roll out in September, the decision to buy into an AHP requires a thorough grasp of the benefits and disadvantages.
AHPs are especially attractive for the middle-class and freelance workers. Though the freelance workforce is one of the fastest growing segments of the American labor pool, freelancers were previously ineligible for subsidies if their income exceeded the ACA threshold. Under the new order, small businesses will enjoy some of the same consumer protections and healthcare anti-discrimination protections applied to large businesses. These benefits include greater flexibility, more negotiating power and increased access to more affordable options than ACA provided. Additionally, popular aspects of the ACA, like out-of-pocket maximums, bans on lifetime maximums and annual limits, coverage of preventative care without additional out-of-pocket expenses, and retaining children on plans until the age of 26, will still apply to AHPs.
However, enhanced choices come at a cost. Since AHP insurers aren't required to cover all 10 "essential health benefits" mandated under the ACA, out-of-pocket cap protection on areas such as maternity care, mental health, emergency services, rehabilitation, prescription drugs and more may be watered down. Consumer advocates argue AHPs bypass rules aimed at protecting people from nefarious practices -- including fluctuating rates based on gender, age, industry and location -- potentially driving up costs in regular individual and small-group markets. For example, AHP premiums for women in their early 30s could be inflated by more than 30 percent compared to regular individual and small-group rules, whereas healthy men working in certain low-risk industries are expected to encounter a lower premium.
AHPs are expected to lure as many as 4.3 million people away from individual and small-group insurance markets -- by offering cheaper premiums, yet providing reduced medical coverage. Additionally, the Trump Administration also shared plans to dramatically shrink federal money devoted to grassroots groups, known as navigators, that help Americans obtain ACA insurance.
Exploring a new frontier -- selecting or forming an appropriate AHP
Beginning Sept. 1, 2018, small businesses will become eligible to form collectives that can purchase AHPs. Responses from a survey of more than 700 small business and franchise employers uncovered 84 percent of respondents expressed interest in offering their own plans. Group purchasing can result in big savings for small businesses -- typically 10 percent to 30 percent -- while reducing administrative overhead, expanding available benefits and serving as a tool to attract new talent by offering compelling benefits packages.
Business owners who have meticulously examined the unique needs of their workforce and are ready to commit to an AHP should formalize the optimal structure for their AHP. In the alternative, they can also consider forming an AHP if one does not already exist (selecting from fully insured medical, self-funded medical or hybrid medical). They should also have a deep understanding of the final AHP rule laid out by the DOL (largely consistent with the proposed rule from January). The final rule outlines how groups or associations can be defined as "employers" under the Employee Retirement Income Security Act (ERISA), since the benefits offered through AHP are typically subject to ERISA compliance. Soliciting the help of qualified legal services and external program managers can play an instrumental role in ensuring plan documents, summary descriptions and other mandatory reporting is fully in place prior to moving forward.
Regardless of your political leanings or feelings about the health-care system, these changes warrant close consideration by small businesses. Knowing your options will help keep you competitive and ensure the health and well-being of your employees. It is worth investing some time to understand your options and give your company a leg up when it comes to the benefits you can offer your current and potential employees.