The new proposal to expand association health plans promises to provide more affordable insurance options for small-business owners and employees. But some experts aren’t convinced that this is the right solution.
For one, the proposal’s promises of consumer protections aren’t as strong as they seem, said Timothy Jost, a Washington and Lee University professor emeritus who closely follows the ACA.
Association health plans can’t charge higher premiums or deny coverage based on health status, according to the Department of Labor (DOL). But because AHPs would be subject to large-employer market rules, they wouldn’t have to cover the list of essential health benefits that the Affordable Care Act mandates.
The upshot, Jost told FierceHealthcare, is that insurers could legally weed out those with costly conditions while still complying with regulations that bar them from denying those individuals coverage or hiking their premiums.
“If you can’t exclude someone because they have cancer, it’s easy to just not cover chemotherapy,” he said. “Or if you can’t exclude people who have mental illness, it’s easy to just not cover mental health care.”
And Larry Levitt, senior vice president of the Kaiser Family Foundation, pointed out in a Twitter post that insurers could still hike premiums based on factors other than health status:
The association health plan regulation prohibits variation in premiums based on health. It does not prohibit premium variation based on any other factor, such as gender, age, industry or occupation, or business size.— Larry Levitt (@larry_levitt) January 4, 2018
Association health plans are also likely to be marketed toward the healthiest, youngest individuals, Jost noted.
“I doubt anybody is going to be out there writing association coverage for occupations that are predominantly people who are older or have chronic health problems,” he said.
The problem, then, is that AHPs would siphon more low-risk consumers out of the individual marketplaces—thus skewing that risk pool and likely causing insurers to raise premiums.
“I think everybody understands that this is going to undermine the market for ACA-compliant plans,” Jost said.
Andy Slavitt, the former Centers for Medicare & Medicaid Services acting administrator, laid out his own criticisms in a Twitter thread—including pointing out that breaking up risk pools goes against the proposal’s stated purpose of giving small businesses more clout:
The regulation aims to push the idea of what can be considered an association.— Andy Slavitt (@ASlavitt) January 4, 2018
Someone I talked to today referred to it as being able to create an "air breathers association." Essentially, making it as rude-less as possible. 4/
Many of the premises of AHPs have been shown not to work in the past.— Andy Slavitt (@ASlavitt) January 4, 2018
For example, the rule says AHPs will create "increased buying power". Breaking up pools does exactly the opposite.
Instead, a "Runners' Association" just sends a clear signal that these are healthy people. 5/
Merrill Matthews, Ph.D., a resident scholar at the right-leaning Institute for Policy Innovation, praised the new proposed rule, noting that it allows small businesses to do what large employers have long been able to: self-insure.
“Self-insured employers have been able to avoid many of the state and federal mandates imposed on the small group and individual markets, which helped employers keep down the cost of coverage,” he said.
But even Matthews acknowledged that the impact of the proposed policy changes is likely to be limited, as it will only apply to small employers and possibly some self-employed individuals. Since the proposed changes are “unlikely to provide much relief” for those affected by high premiums in the individual market, he said, “Congress still needs to repeal the Affordable Care Act.”
Questions about oversight
Perhaps the biggest issue that Jost saw with the new proposal was the fact that AHPs have had past issues with insolvency, bankruptcy and even fraud.
“There’s just a long history of association health plans being formed that are thinly capitalized, that pay large salaries and expenses for their owners, and disappear when the going gets rough,” he said.
For its part, the DOL said it will “closely monitor these plans to protect consumers.” But Jost pointed out that the agency has experienced staff and budget cuts that might undermine that goal.
Even the DOL itself said in the proposed rule that “the flexibility afforded AHPs under this proposal could introduce more opportunities for mismanagement or abuse, increasing potential oversight demands on the department and state regulators.”
Ultimately, what plays out will largely be decided by how states respond to the new regulations once they are implemented, Jost added.
“In states that try to take an aggressive approach to regulating them, there won’t be that much activity,” he said. “And in states that take a hands-off approach and let anything go, there will be probably quite a bit of activity until [AHPs] start going belly up.”