Let’s take a moment to answer three important questions:
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Will AHPs lower premiums?
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What type of coverage will AHP members receive?
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How will this affect us in Colorado?
Will AHPs lower premiums?
The new rule will allow premiums to be based on numerous factors; gender, age, industry, geography and occupation, not all of which are allowed in fully insured rating. However, these factors cannot include health status.
According to Benefits Pro “AHPs are likely to provide lower premiums for two reasons: 1) they are exempt from requirements to cover the ten essential benefits required by the Affordable Care Act, and 2) the law allows for more flexibility in the way AHP premiums are set.” More to come on the essential health benefits.
Essentially, the lower premium question depends on several factors. Companies that are healthy and young could receive lower premiums, much as they could today by looking at a partially self-funded arrangement. Companies with older employees or with a good amount of women in their child bearing years could face higher premiums.
What type of coverage will members receive?
Association Health Plans are not expected to offer the comprehensive and catastrophic protections as required by traditional health plans. AHPs are exempt from some regulations, most notably in regard to essential health benefits which include preventive care, ambulatory services, emergency services, hospitalization, mental health services, maternity care, prescription drugs, rehabilitation, laboratory services, and pediatric care. For example, it would be easy to cut about 15% off the cost of a plan by not covering any pharmacy costs, so eliminating services will likely be the main way costs will be reduced.
AHPs will be an attractive option for the young and healthy who do not seek much medical care. However, for those individuals who generally utilize care, the AHPs may not cover all the services a member is looking for. Companies need to do extensive research on these AHP offerings to ensure that they are going to meet the health needs of all their employees.
How will this affect us in Colorado?
The interim Colorado Insurance Commissioner, Michael Conway, is quite opposed to these plans, as he’s worried that these plans could destabilize our small group market. Many health care experts believe that the AHPs will pull too many healthy people out of the small group market, leaving it with an unstable population of sick people who desperately need a traditional health plan. Because self-employed individuals with no employees can also join AHPs under the new rules, this may cause rate spikes in the individual market too. The interim Commissioner has stated he will be very wary before approving any AHPs for sale in Colorado, but it remains unclear whether he can prevent out-of-state plans from operating here.
Another factor concerning some is that in the past, groups had to demonstrate they were a bona fide association that existed for other reasons, to assure a spread of risk, rather than just a group of people who had significant medical bills. But under the new rule, “providing members with insurance can be the main purpose of the association health plans,” according to NPR. This makes it easier for AHPs to form, but may make it harder for insurance companies to manage the risk in the pools. Some experts fear this could take us back to the days when a number of Multiple Employer Welfare Arrangements went bankrupt and stuck employers and members with unpaid claims. For these and other reasons, twelve state Attorneys General sued on 7/26/18 to block the implementation of the rule.
Conclusion
Stay tuned as new developments emerge and we see whether AHPs appear to be a viable option in Colorado.
If you are wondering if these new AHPs may be a fit for your organization, contact us to learn more.
