If you own a small company, you know the frustration of not having the same buying power as large groups when purchasing health benefit coverage.
According to the National Conference of State Legislatures, small businesses on average pay eight to 18 percent more than large companies for the same health insurance policy.
That may change with a new rule that gives small businesses more freedom to create Association Health Plans (AHPs). The Department of Labor (DOL) began phasing in the final AHP rule on Sept. 1, 2018.
The Benefits
An AHP gives small businesses the ability to purchase insurance in the large group market with the same kind of leverage large companies have to negotiate prices and benefits. Companies with young, healthy employees will most likely be able to get the lowest premiums. Young men in certain low-risk industries who are currently healthy will have the lowest premiums. Companies in some industries, such as engineering companies, could be about nine percent lower than what they could get on the individual or small-group market.
The reason rates are lower is that AHPs don’t have to follow certain Affordable Care Act (ACA) rules and regulations, which gives the associations more flexibility when developing their plans. Certain core ACA services, such as mental health care and newborn care, could be left out of coverage as a way to lower costs.
Keep in mind that AHPs are regulated at both the federal and state level, so the availability of AHP plans will depend on your state’s regulations.
Eligibility
To form an AHP, small employers must meet one of these requirements:
• Be in the same business, trade, industry or profession; OR
• Have a principal place of business within a region that does not exceed the boundaries of the same state or the same metropolitan area.
How AHPs work
Association Health Plans already in place can continue to operate under the final rule. What’s different is that the Trump administration’s new regulation loosens the rules, allowing more small businesses, including individuals who work for themselves, to join these plans. For example, associations now can be based on geography alone or the main purpose of an association health plan can be to just provide insurance.
The final rule does not subject AHPs to the Affordable Care Act’s individual and small group market rules. But it does implement safeguards and monitoring procedures to enforce anti-discrimination protections for AHP enrollees. For instance, a business cannot be left out of an AHP if its employees have higher-than-expected care costs. AHPs also cannot discriminate based on an individual’s health conditions or their part- or full-time employment status. However, states have been given discretion to limit AHP enrollment in relation to other non-health factors.
Some of the ACA rules and regulations still in place include:
• Requiring plans to cover preventive care without charging consumers out-of-pocket expenses.
• Allowing parents to keep their kids on their plan until they reach age 26.
Some differences include:
• Allowing an association plan to charge higher premiums to companies that employ workers in dangerous occupations.
• Allowing association plans to charge different rates based on gender, age and location.
• Not having to include the 10 “essential health benefits” that are required under the health law for plans in the individual and small-group market. For instance, an AHP might decide to exclude coverage for prescription drugs or rehab services.
• Requiring AHPs with 15 or more employees to offer maternity coverage, but smaller groups do not have to offer that benefit.
The Down Side
The DOL and the Congressional Budget Office estimate that as many as 400,000 individuals will decide to enroll in newly expanded AHPs. Observers are concerned that this will draw healthier individuals out of the ACA plan market, leaving less healthy individuals in the risk pools. This could destabilize the market and lead to higher premiums for individuals.
Other concerns are that to save money, employees in AHPs who don’t get full health plan coverage may end up needing full health plan coverage. However, if an employer doesn’t offer minimum essential coverage, and the company has more than 50 full-time equivalent employees — the employees can shop for subsidized health insurance on the marketplace, and the employer could face penalties.
While the intent of AHPs is to save money, some AHPs might face higher premiums if they are located in certain regions, have a majority of female employees or have seriously ill employees.
Your Options
Although only “bona fide” groups or associations can create an AHP, your broker can
consult or help develop AHPs by providing claims administration, formulary guidance, and provider network design.
For more information, please contact us.