The Trump Administration says that expanding association health plans to more small businesses and self-employed people will bring down costs, but will it also reduce coverage?
Small businesses and self-employed workers may form associations and buy group health insurance as soon as September 1 — that is, according to a newly final rule released by the Department of Labor (DOL). The move follows an announcement earlier this year by the Trump Administration explaining its intention to provide an alternative to ACA state exchanges for smaller employers and independent workers.
Under the rule, small businesses and freelancers could establish an association health plan (AHP), so long as firms and individuals work in the same geographic region. AHPs can also be formed nationally if the businesses and self-employed workers share the same profession.
According to a DOL estimate, enrollment in association health plans could top 4 million people by 2023, including roughly 400,000 currently without health insurance. While the proposal would keep certain provisions of the ACA intact, these plans would exempt associations from mandated services currently required under Obamacare such as maternity care, mental health treatment, and prescription drugs.
Insurance professionals are likely to keep a close eye on how AHPs affect the wider healthcare market. Although advocates stress association-based health insurance could lower rates for members who currently lack coverage, the plans will not necessarily offer the same coverages and protection that have been a hallmark of the ACA.
Lower Cost, But Less Care?
The DOL’s AHP guidelines feature several provisions now included in the ACA. Yearly out-of-pocket expenses are capped, and the plans would be prohibited from instituting an annual or lifetime limit on the dollar amount of medical services rendered.
As the rule is written now, AHPs would also be banned from denying coverage to individuals with pre-existing conditions. However, the Department of Justice recently supported a lawsuit brought by several states that seeks to strike down that provision of Obamacare. AHPs could also base insurance premiums on other factors, such as profession, age, and gender.
AHPs may draw a sizable number of people currently getting health insurance on the ACA exchanges but who fail to quality for the law’s subsidies because their earnings are too high. Those individuals might see reduced rates, with an estimated premium $9,700 less per year than individual plans bought on the individual marketplace. A small business switching from the ACA exchanges to an AHP would be estimated to pay $2,900 less a year.
Of course, the reduced costs would be in part due to fewer benefits offered and a generally healthier pool of plan members. It’s that slimmed down service list that has some worried, especially if members suffer serious illness and injury and cannot receive treatment. The American Cancer Society Cancer Action Network warned that AHPs could, for instance, decide to not pay for more expensive cancer drugs.
Impact to the ACA Exchanges
One aspect of the healthcare sector that may get dinged by AHPs is the ACA marketplace. As individuals and small businesses switch to AHPs, ACA premiums could spike as fewer healthier people sign up and the pool shrinks. Experts project that as 3.2 million current ACA enrollees move their medical coverage to association plans, ACA rates could rise by 3.5% for individuals and 0.5% for small businesses.
The DOL agrees that AHPs may push healthier people away from the ACA market, leaving sicker individuals to buy from the exchanges. Its own analysis confirms this might lead to increased premiums in the ACA marketplace.
In addition a negative effect on the exchanges, the DOL acknowledges the need to boost oversight in order to stop fraud and abuse. Before that can happen, however, the DOL said it would need extra funds from Congress to support enforcement activities.
Insurance agents working with small businesses and individuals who currently buy policies from the ACA exchanges may be asked whether they’re interested in joining an AHP. Agents should remind their clients contemplating this move that the plans are in the early stages right now with further details still needing to fall into place.
Further, agents must research any AHP to determine if it covers the medical services clients require now — and in the future.