Over the weekend, the Centers for Medicare & Medicaid Services (CMS) issued a statement saying it was halting billions of dollars of payments to insurers under the Affordable Care Act’s risk adjustment program due to conflicting federal court decisions on the program. This move will likely disrupt the insurance market in the Exchanges and could lead to more premium increases next year.
The purpose of the risk adjustment program, a permanent program, is to reduce the incentive for health insurers to select and cover only healthy individuals in the Exchanges. It shifts money from plans with healthier members to those with larger numbers of sicker members to help mitigate high costs of coverage for less healthy individuals.
America’s Health Insurance Plans (AHIP), the association for insurance carriers, expressed concern and stated, “the decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own. It will create more market uncertainty and increase premiums for many health plans—putting a heavier burden on small businesses and consumers, and reducing coverage options. And costs for taxpayers will rise as the federal government spends more on premium subsidies.”
The CMS has asked for additional guidance from the district judge overseeing the case relating to this program, prior to unfreezing the funds.
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.
It’s time to get covered! Millions of Americans count on HealthCare.gov for quality and affordable health coverage. If you or someone you care about needs health insurance, you should know that Open Enrollment for 2016 coverage runs from November 1, 2015 through January 31, 2016.
Learn about options available in your area by visiting HealthCare.gov or call 1-800-318-2596.
Key Dates and Deadlines
November 1, 2015: Open Enrollment for 2016 Marketplace coverage begins.
December 15, 2015: Deadline to enroll for coverage starting January 1, 2016.
January 15, 2016: Deadline to enroll for coverage starting February 1, 2016.
January 31, 2016: Last day of Open Enrollment for 2016 Marketplace coverage.
Helpful Resources for Business Owners & the Self-Employed