Starting in the 4th quarter of 2018, we could see the release of association health plans in Indiana and the rest of the country. Under the final rules from the Department of Labor, a small business can join to form association health plan (AHPs), this would give the small employers access to large group health insurance coverage.
One aspect of the final ruling that has received no attention is old association health plans (AHPs) can continue to operate under pre-Affordable Care Act rules. The old rules allow an insurance company to underwrite the small group and assign a risk factor, which then determines the cost. The small group must have at least two full-time employees, but they can be husband and wife. Currently, Indiana has active associations that are offering access to health benefit under the old rules. American Society of Civil Engineers, Indiana Dental Associations, Indiana Manufacturers Association Group Insurance Trust, National Funeral Directors Association, Banking, Faith-Based, Social Services, and Transportation and others.
These association health plans can be viable solutions for small group vs community rates under the ACA. If a group received the best-case scenario after underwriting, a group could save over 20% vs full insured rates. The association should also have an additional premium discount on the 20% maybe another 5%.
Most associations with 500+ members can investigate setting up associations that are operating under the pre-ACA rules of underwriting each case. The insurance company is limiting their risk with the per case underwriting practices but if your small company can reduce their health insurance premium, why not look at this option.
The new rules for creating AHPs is not attracting much competition. First, the insurance companies are not allowed to develop the health plan. They can administer it, but the associations must put it together. Most associations may not have much experience in developing health insurance vehicles. The insurance companies are hesitant about any insurance products that are guaranteed issue. The ACA has proven the guaranteed issue market can create substantial financial losses for carriers. Any association health plan that is self-funded will governed under the multiple Employer welfare arrangements (MEWA) at a state level, which prevents them from being a multi-state.
The fourth quarter of 2018, we should see a push from AHPs operating under the old rules of underwriting.
Here at Nefouse & Associates, we are looking to develop an AHP for Indiana that will take effect in 2020. If you are a small Indiana business will no employees or less than five, you may be a good candidate. Contact us, and we can provide information on the AHP development.