The Trump administration is touting “association health plans” as a way for small business employees and self-employed people to get more affordable health insurance, but some experts and advocates say consumers should proceed carefully.
The Department of Labor last week expanded access to association health plans with a new rule that President Donald Trump requested in a 2017 executive order. The new regulations will make it easier for groups of people, small businesses and even sole proprietors and their families to join forces and buy group health coverage.
For example, a group realtors or teachers could form an association, pool their resources, and buy insurance that would cover all of them. Farm bureaus sometimes provide association health plans for farmers and ranchers. Under the new rule, it will be easier to form these groups for the sole purpose of buying insurance.
Republicans have lauded the plans as a more affordable option than Affordable Care Act insurance, while Democrats have derided AHPs as “junk insurance.” The attorney generals of New York and Massachusetts have both said they’ll sue the Trump administration over the expansion of the plans.
Proponents of Obamacare see expanding AHPs as an attack on the Affordable Care Act that will lure consumers away from ACA plans with cheaper premiums, but give them skimpy medical coverage. Between 3% and 10% of people enrolled in Obamacare individual market plans are expected to leave and join AHPs under the new rule, an analysis by the insurance publication The Actuary found.
Here’s what consumers need to know about AHPs.
An AHP could save you money...AHP premiums are estimated to be $9,700 less per year than ACA individual market plans, and $2,900 cheaper than small group market plans, a February 2018 analysis by the Washington, D.C. health-care consulting firm Avalere found.
“Association health plans would be particularly attractive for middle-class Americans who do not qualify for the generous Obamacare health insurance subsidies because their income is too high,” wrote Robert E. Moffitt, a senior fellow at the conservative Heritage Foundation.
One of the arguments in favor of AHPs is that groups of people or small businesses will be able to save money by banding together to buy insurance, which will in turn lead to lower premiums. But those lower premiums could also result from AHPs providing thinner coverage and serving healthier people, a 2017 issue brief by the nonpartisan American Academy of Actuaries concluded.
...but buyer bewareAn AHP may not cost as much as other plans, “but you have to be wary that it doesn’t cost as much because it doesn’t cover as much,” said Cheryl Fish-Parcham, director of access initiatives at Families USA, a nonprofit that advocates for access to health insurance.
AHPs are not required to cover the 10 “essential benefits” that insurers must cover under the Affordable Care Act. That means AHP plans could skip coverage of prescription drugs, maternity care, mental-health services, and substance-use disorder treatment, Fish-Parcham said.
However, AHPs will be required to provide summaries of benefits, so consumers should review those carefully to see exactly what each plan covers, she added.
“As a physician, I know from experience how crucial it is that patients have access to insurance plans that meet full health care needs. This rule will do the opposite,” said American College of Physicians president Ana María López in a statement following the announcement of the new rule.
AHPs may not have as many consumer protectionsAHPs won’t be allowed to charge higher premiums or deny coverage because of pre-existing conditions, or cancel coverage if a worker gets sick, according to the Department of Labor. But AHPs will be allowed to charge different premium amounts based on age and gender, said Cori Uccello, senior health fellow at the American Academy of Actuaries.
The plans could also charge different rates based on what kind of job the consumer has or which industry they work in, The Actuary reported.
“Premiums could be more attractive for younger people than for older people,” Uccello said.
That could lead to AHPs skewing toward a younger, healthier population, which would then leave older, sicker people in the ACA plans — pushing their premiums up. “The people who are left in ACA plans are going to be higher-cost people,” Uccello said.
Premiums for ACA and other plans are expected to go up“We’ve been concerned that AHPs might essentially redline and sell in rich areas where consumers tend to be healthier and not in areas where they don’t,” Fish-Parcham said.
The new rule is expected to increase premiums in the ACA individual market by 3.5% and increase small group premiums by 0.5%, Avalere’s analysis found.
AHPs could provide coverage for freelancersAHPs could also open up a new path to health insurance for freelancers, a fast-growing segment of the American workforce. Under the new rule, sole proprietors will be able to join AHPs for the first time. “This is the most promising proposal for quality insurance for self-employed people who might make $60,000 to $70,000 but get no subsidies,” Republican Tennessee senator Lamar Alexander told the Wall Street Journal.
A spokeswoman for the Freelancers Union said the group is still evaluating the impact of the rule on its members. A spokeswoman for the National Federation of Independent Businesses called AHPs “one path toward helping ensure that small businesses are operating on a more even playing field.”
