The Department of Labor released their final rule on the creations of Association Health plans.
There has been a great deal of criticism and misinformation in the media.
The DOL final rules provide the guideline for setting up association health plans. These plans would be governed by both State and Federal guidelines. The Employee Retirement Income Security Act of 1974 (ERISA) would be just one of the laws that the AHP’s would have to follow.
Small employers could join in an association to purchase a group health insurance plan under as a large group entity. Previously small employers were unable to do this because they were governed under small group laws. This prevents small employers from being treated as a large employer from a health insurance standpoint. Under a small group, a company must have at least two employees to be eligible for benefits. This has created an obstacle for most owners who have no employees. Under the new AHP guidelines, the working owner with no employees can now be eligible for a group health plan.
In Indiana, we saw a large number of business consultants leave employers and operate as a sole proprietor with no employees. At the beginning of the ACA, there were multiple individual health insurance companies that provided decent coverage at a somewhat fair cost. This allowed these consultants to operate as self-employed. We fast forward to 2018, the individual market has collapsed, and the policies left are very expensive with limited network access. Thus, most of the Indiana business consultants have rejoined corporation because of the health benefits. With a properly formed AHP, Indiana consultants will have the option of returning to be self-employed without a lack of insurance options preventing them.
There has been much criticism about the AHP’s offering limited benefit or being subject to fraud. The DOL’s final rule clearly states the guidelines the health plans must follow. The plans will have the ability to limit coverage that has been required by the affordable care act, but it’s a very fine line. The rule states if an AHP covers one of the essential benefits, it cannot limit that coverage. The AHP could exclude coverage for one of the essential benefits. There are still multiple safeguards that the plan must go through to be approved. The AHP still must meet state guidelines to be approved, and the state is not going to approve a plan that may be questionable coverage. What could be excluded is pediatric dental & vision which could reduce the cost by 3.5%. The members of the associations must control the group health plan. This could lead to the members voting on what benefits to cover. Even with membership control, the state Department of Insurance would still have to approve the plan.
An AHP that operates in multiple states is allowed but only if the association is in a tri-state type of situation. Realistically, let’s say we have an association of Light Bulb distributors located in Evansville Indiana, that association could have members in Missouri, Kentucky & Maybe Illinois or Ohio. In that situation, you could have AHP in multiple states. If that were to happen, the AHP would have to be approved by multiple Departments of Insurance. The DOL Final ruling appears to be more favorable to AHPs operating in single states and providing a health plan to certain industries. AHPs are prohibitive of offering blanket coverage to any industry.
The AHP must not be sponsored by an Insurance company. This means that an insurance company can have little to do with the development of the AHP outside of providing coverage and administration services. This can create a barrier to starting a new AHP. It will take someone that has specific knowledge and experience to launch a new AHP.
How much savings could an AHP deliver vs. the ACA Market?
This is the big question that as of now there is no answer. Many variables would impact the cost of an AHP. For an Indiana AHP to honestly be success full, I think the price should be that of pre-ACA, which would be about 50% less than the current small group and Individual plans.
Here at Nefouse & Associates, we have decided to explore setting up an association plan for Indiana business consultants.
Contact Us if you are interested.
