Will the release of final Association Health Plan (AHP) rules provide relief for small employers struggling with rising medical premiums? On October 12, 2017, President Trump issued an executive order, “Promoting Healthcare Choice & Competition Across the United States”. This action was viewed by many as a positive sign for many businesses battling medical insurance costs. The path remained unclear, however, until just a few weeks ago when the Department of Labor (DOL) issued final rules related to Association Health Plans.
These final rules expand the definition of an employer under ERISA to allow employers that share a common geographic location – or engage in the same type of business – to bind together and purchase insurance through an Association Health Plan. The “commonality of interest” is a flexible definition with a lot of room for interpretation. As benefit advisors, our team reviews regulatory changes and evaluates the pros and cons for employers. In an insurance market that is struggling to innovate and reduce costs for their customers, AHPs will bring choice. This article will share a few initial observations.
For trade/business associations, this is a way to add value to their membership benefits, add a revenue stream and increase membership retention. Some membership organizations used to have prior experience running Association Health Plans and may explore reestablishing these programs. Given the flexibility in the definition, other groups might consider establishing an AHP such as franchises, businesses that service industries like real estate agents, individual investment advisors and hospital systems to independent medical staff with privileges.
For sole proprietors with no employees, the final rules provide them relief and allow them to purchase insurance through AHPs. These business owners currently have the fewest choices and many have been forced to the individual insurance market. In southeastern PA, IBC is the primary insurer as other carriers have exited the individual market. Rates have risen and there are fewer plan design options. This group will welcome options!
For employers with fewer than 50 employees, there is the opportunity to access different plan designs and pricing. In addition, the ability to pursue options through trade groups located in geographic areas with access to lower medical costs or additional insurance carriers is attractive.
Legal challenges are expected by numerous States and State Insurance Departments will have their own regulations for those plans operating within their State.
The establishment of an AHP does not negate Healthcare Reform rules and employers will need to be careful not to run afoul of reporting requirements.
Insurance carriers will have to set underwriting guidelines and determine how to set premiums with no historical claims data. In addition, an AHP will need to reach a critical mass to create stability. This may create pricing volatility for the AHP.
For groups looking to build an AHP, there are numerous responsibilities surrounding the formation and governance.
AHPs will be phased in over the next 12 months and current fully-insured Associations can begin operation starting September 2018.
Potential organizations will begin to evaluate their membership to see if an AHP is viable for them.
Tycor is continuing to review opportunities and is hosting a webinar for employers on August 16, 2018 to discuss AHPs in further detail.
If you are interested in exploring if an AHP is right to offer to your organization’s membership, give us a call! We can help.