Tag Archives: AHPs

WIPP Works in Washington – August 2018

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Pay No Attention to that Man Behind the Curtain

Ann Sullivan, WIPP Chief Advocate

In the final scene of the Wizard of Oz, the dog Toto pulls back the curtain and Dorothy discovers the man behind the curtain is not the great and powerful Wizard, he’s just a little old man with a megaphone. Sometimes, actions in Washington use the megaphone but there is relatively little “behind the curtain.” That’s how the new rule on Association Health Plans (AHPs), issued by the Department of Labor, feels.

It was with great fanfare that the Administration issued new rules for AHPs. WIPP has supported AHPs since its inception as a necessary tool to allow small businesses to band together to create larger health insurance pools, thus creating more competition and better prices in the small business marketplace. Insurance rules adopted during the Affordable Care Act (aka Obamacare) largely prohibited AHPs from a viable option. Because every insurance plan had to cover 10 “essential health benefits” under the ACA, these plans became mute.

When the Department of Labor announced loosening the regulations to allow AHPs, we applauded. WIPP submitted comments urging better pooling mechanisms, a wider range of health plan options and protections for those with pre-existing conditions. We also urged the Department to include a different “commonality of interest” definition, allowing small businesses to band together beyond a trade, industry, or profession. This would have allowed small business organizations to offer AHP membership to its members, including WIPP.

On June 21, the man behind the curtain showed up. The Department of Labor issued its new AHP rules. By deciding to keep the definition of who can join an AHP to a trade, industry, or profession, business organizations like WIPP, cannot offer an AHP. For example, an accountant in Nevada could join an AHP housed in a national association of accountants, but an organization of women business owners, does not qualify as a trade, industry, or profession, according to the new rules. The AHP can have out-of-state members but must comply with the rules of the state in which it is housed, restricting its ability to be a true “across state lines” option. Important to note is that AHPs are not required to offer the 10 essential benefits, which means education for employers and employees who join AHPs is needed.

News reports suggested that small business associations who have supported AHPs in their policy platforms are not going to take advantage of the new rules. That’s because they can’t—their commonality is business owners, not limited to a specific trade, industry or profession. Giving small business owners more health insurance options continues to be part of our policy platform. As premiums continue to rise, small business exchanges set up by the ACA should not be the only option. The Department of Labor could have done so much more than use their megaphone.

Administration Eases Restrictions on Association Health Plans

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Due to a move by the Trump Administration, the Department of Labor released the final version of its Association Health Plan rule, which allows industries and small businesses to band together via bona fide associations to buy insurance as part of a plan to encourage competition in health insurance markets and lower the cost of coverage. AHPs will be an important part of employer options for coverage beginning in 2019.

The Association Health Plan (AHP) rule broadens the definition of an employer under ERISA, the Employee Retirement Income Security Act, to allow more groups to form association health plans across state lines, similar to large employers. Key provisions in the final AHP rule include:

  • Expansion of definition of those that can form an Association Health Plan (AHP) – An association that represents a single trade, specific industry or profession can now establish an AHP that provides coverage to their members across the entire country, like a large employer plan. General business organizations and workers, or business owners in unrelated professions can band together to obtain coverage through an association health plan, but they must be in the same geographic region. While this allows for a breadth of types of AHPs – national, statewide or local – by restricting criteria of commonality to establish AHPs across state lines, many existing national associations will be unable to set up AHPs and provide access to affordable insurance options to their members.
  • Association Health Plans (AHPs) can bypass certain requirements of the Affordable Care Act (ACA) – AHPs do not have to meet ACA essential health benefits requirements, thus they do not have to cover all the benefits that are currently required in the health insurance plans presently sold in the state exchanges. While this will allow AHPs more flexibility in customizing plan options, and likely result in lower premium costs, it is important for business owners and workers to note that these plans will likely offer less comprehensive coverage.
  • Association health plans cannot restrict membership based on health status or charge sicker individuals higher premiums – An AHP will operate like a large employer plan and includes nondiscrimination rules ensuring the association cannot deny coverage to anyone that meets their membership requirements and wants to purchase coverage. AHPs can adjust premium costs of members based on age, which is similar to age rating rules in current ACA health exchanges.

WIPP has supported the implementation of AHPs as an effective mechanism for small businesses to pool together to obtain affordable health insurance. WIPP submitted comments to the Department of Labor on the proposed Association Health Plan rule, highlighting that WIPP believes that a successful healthcare market should encompass three core principles: an effective pooling mechanism, a wide array of health plan options, and a protection in place for those with pre-existing conditions.

In addition, WIPP recommended including an additional criterion for commonality of interest to allow employers to band together for the purpose of establishing an AHP through a membership organization or association that is comprised of members regardless of whether they are in the same trade, industry, line of business or profession, and regardless of whether they are located in the same area. Unfortunately, as highlighted above, the Department of Labor did not agree with this more expansive view, leaving national business organizations like WIPP unable to set up an AHP across state lines.

The Department of Labor shared a fact sheet on the new rule that noted important dates for associations or business owners interested in AHPs:

  • All associations (new or existing) may establish a fully-insured AHP on September 1, 2018.
  • Existing associations that sponsored an AHP on or before the date the Final Rule was published may establish a self-funded AHP on January 1, 2019.
  • All other associations (new or existing) may establish a self-funded AHP on April 1, 2019.

Although the Affordable Care Act envisioned state exchanges rather than AHPs, WIPP believes there is room for both. Though the Obamacare Exchanges initially gave small businesses more coverage options, many plans have dropped coverage, leaving the small business market with fewer coverage options and premium costs have risen year over year. The expansion of AHPs would provide more cost-effective coverage options for small businesses and the self-employed.