On March 6, the comment period ended for a proposed rule to revise the way association health plans (AHPs) are regulated by the Employee Benefits Security Administration of the Department of Labor. The proposed changes include allowing AHPs to offer plans across state lines, to loosen the criteria for what constitutes an association, and to bypass many requirements of the Affordable Care Act (ACA). Although some small business groups have welcomed the proposal, many healthcare, insurance and consumer advocacy groups are concerned that the effects of the proposed changes might lead to inferior or even insolvent insurance plans, negatively impact the financial viability of the ACA and encourage growth in the number of Americans without health insurance.
Background: Executive Order 13813 and the Affordable Care Act
After the failure of Congress to repeal the Affordable Care Act in September 2017, President Trump issued Executive Order 13813 on October 12, 2017. Titled “Promoting Healthcare Choice and Competition Across the United States,” this order sought to reduce the cost of insurance for select groups by allowing expanded association health plans, short term insurance plans and health reimbursement accounts as alternatives to the more expensive and comprehensive plans offered under the ACA. A second major objective of the executive order was to weaken Obamacare by drawing off young, healthy participants, thereby increasing costs and financial stress on plans offered through the federal or state exchanges.
Association Health Plans and Proposed Changes
Association health plans allow groups of employers to band together to get health insurance. This is particularly appealing to entrepreneurs and small businesses who are, on their own, not in a position to negotiate insurance rates effectively and are often left with high premiums under the ACA. Several of the proposed changes would make it easier to create AHPs and to reduce premiums.
First, the new rules would allow AHPs to form across state lines. Second, the rules concerning the nature of associations would be loosened so that the entire purpose of an association could be simply to pool resources in supplying benefits rather than requiring any more substantial relationship. Next, sole proprietors or individual freelancers would be able to join these associations. Finally, insurance plans offered under AHPs would not need to comply with the full requirements of the ACA and could reduce premiums by offering fewer benefits.
Concerns About Proposed Changes to AHPs
While more flexibility for small businesses and lower premiums appeal to the people who can’t afford Obamacare’s more robust major medical plans, there are reasons why many industry and consumer protection organizations oppose these changes. Critics point to past mistakes with association health plans. Similar plans, called multiple employer welfare arrangements (MEWAs) were created in the previous decade, with a great deal of initial optimism, but proved problematic due to a high rate of insolvency, and, even worse, AHPs themselves have a history of fraud. AHPs would also be able to organize in a state with fewer coverage and lower solvency requirements and then offer coverage under those rules in other states, effectively destabilizing state insurance marketplaces. By potentially cherry-picking younger and healthier populations, AHPs could further weaken the ACA by leaving it with an older and sicker pool of people to insure on the average, which would increase premiums for everyone else nationwide. In February, a similar proposed rule from the CMS called for short-term health insurance plans to be extended to 12 months, up from the current three-month limitation under Obamacare.
