Association Health Plans (AHPs) have been in the legislative news recently, with Rand Paul announcing a new bill to amend the Employee Retirement Income Security Act of 1974 to clarify the treatment of association health plans. Earlier this year, representative Tim Walberg introduced the Association Health Plan Act.
Let’s take a look at AHPs and the impact these Association Health Plan bills may have on them.
What are Association Health Plans?
Association Health Plans (AHPs) are arrangements that allow individuals or employers, particularly small employers and self-employed people, to join together to buy health coverage. The goal, according to supporters, is to provide these groups with a way to negotiate lower premiums and better benefits, potentially enjoying some of the flexibility currently available to large employers with self-insured plans. Joel White, president of the Council for Affordable Health Coverage, stated that AHPs could help solve problems in the small-group health insurance market, where small businesses are “drowning in health care costs,” leading to less than one-third offering coverage due to high fees.
What AHP limitations do the two Association Health Plan bills aim to overcome?
The two bills, H.R. 2528 (sponsored by Rep. Tim Walberg) and S. 11 (sponsored by Sen. Rand Paul), aim to address several limitations currently faced by small employers and self-employed individuals when seeking health coverage:
The primary limitations the bills seek to overcome include:
Difficulty for Small Employers and Self-Employed to Group Together
Current federal rules “put tight restrictions on efforts by individuals and employers to team up to buy health coverage.” The bills aim to make it easier for employers and self-employed people to join an AHP by allowing associations to be treated as a single “employer” under ERISA.
Lack of Bargaining Power and Flexibility
Small employers and self-employed individuals often can’t bargain for lower premiums and better benefits, unlike large employers who may have self-insured plans. AHPs, as envisioned by the bills, would give these groups a way to pool together to achieve some of this bargaining power and enjoy similar flexibility that large employers experience.
High Costs in the Small-Group Market
Joel White, president of the Council for Affordable Health Coverage, states that “Small businesses are drowning in health care costs,” leading less than one-third to offer coverage because “high costs are the reason.” He believes the bills could help “solve the problems now plaguing the small-group health insurance market” by making coverage more affordable.
Ambiguity or Difficulty in Treating Associations as “Employers”
The bills explicitly amend ERISA to clarify how it treats the criteria under which a group or association of employers as an “employer.” The bills clarify the regulatory framework, allowing associations that meet specified conditions (such as having been in existence for at least two years, formed for purposes other than providing health insurance, covering at least 51 aggregated employees, having a governing board, etc.) to operate AHPs more clearly under ERISA.
Inclusion of Self-Employed Individuals
The bills specifically address the status of self-employed individuals, treating them as employers, employees, and participants. This treatment allows them to join AHP.
Premium Rating Constraints (to some extent)
The bills set rules for AHP premiums, allowing groups with employees to use a modified community rating based on pooling all claims and adjusting individual employer risk profiles. For groups comprised solely of self-employed individuals, they must be treated as a single risk pool and charged the same rate (if at least 20 members).
The bills aim to use the AHP mechanism to provide small businesses and self-employed individuals with a way to band together under a federal framework, enabling them to access health insurance that supporters hope will be more affordable and offer better benefits than options currently available to them individually or as small groups.
Do these bills have a chance?
There are indications that the bills aiming to make it easier for small employers and self-employed people to join AHPs have some potential to move forward, particularly the House version.
A significant factor contributing to that assessment is that Rep. Tim Walberg, the lead sponsor of H.R. 2528, recently became the chairman of the House Education and the Workforce Committee. This committee has jurisdiction over the bill. This chairmanship puts him in a better position to get the bill through Congress.
Republicans, employer groups, and some Democrats have supported past AHP bills. However, Walberg’s bill currently has 13 co-sponsors, all of whom are Republicans. Paul’s bill has one co-sponsor, Sen. Roger Wicker, R-Miss. No Democrats have signed on to these bills.
There are also factors indicating potential hurdles. Insurers, many state insurance regulators, and some Democrats in Congress have been skeptical about AHP proposals. Skeptics fear that expanding access to AHPs could weaken the market for fully insured health coverage and weaken regulators’ ability to address problems at AHPs. Specifically, there are worries that “good risks” might exit fully insured plans for AHPs, leaving “poor risks” concentrated in the fully insured market.
Certifi helps association health plans bill and collect payments from member groups with employer premium billing and payment solutions.
