States could play pivotal role in regulating association health plans
Following President Donald Trump’s executive order expanding association health plans (AHPs) in October, a new analysis offered ideas for how states can protect consumers and stabilize insurance markets.
Researchers from Georgetown University’s Center on Health Insurance Reforms warned about the possibility that expanding AHPs could result in patients losing protections and the overall market becoming unstable.
They offered potential solutions depending on how much oversight the federal government allows states. The two main recommendations were requiring insurance sold through AHPs to comply with key market standards and practices and requiring them to meet the same financial solvency standards as commercial insurers.
Conservatives have long pitched expansion of AHPs. They believe that allowing small businesses and organizations to band together will result in better and more affordable coverage. Before the Affordable Care Act (ACA), millions of individuals and small employers bought health insurance through associations. Many states also exempted AHPs from rules and standards that commercial insurers needed to follow, such as underwriting restrictions, benefit mandates and solvency standards.
The ACA changed that and instituted protections, such as regulating AHPs the same as individual and small-group market plans, including the requirement to cover people with preexisting conditions.
However, AHPs supporters argue that exempting the plans from federal and state laws allows employers to find more affordable options. Opponents worry AHPs can charge higher premiums “to employers with less-than-perfect claims experience,” according to the report. The researchers also warn that AHPs “have a long history of insolvencies and even fraud, leaving policyholders and providers with millions of dollars in unpaid claims.”
Earlier this year, the American Academy of Actuaries raised the alarm that AHPs could “fragment the market” when lower-cost groups and individuals create AHPs, leaving higher-cost groups and those remaining in traditional plans. That would cause higher premiums in non-AHPs, resulting in higher-cost patients and groups having trouble finding coverage.
How exactly the federal government will regulate AHPs is still in question. In his executive order, Trump asked HHS and the Department of Labor to write new regulations, which will go through the regular notice and comment process.
Depending on what’s ultimately decided, the Georgetown researchers offered a range of options depending on what the federal government allows. Katherine Hempstead, senior adviser at the Robert Wood Johnson Foundation, which provided funding for the research, said she expects states will continue “to play a key role in determining whether and how association health plans are implemented.” States will also play critical roles in shaping individual markets with the end of the individual mandate fine, she added.
In addition to AHPs, Trump’s executive order expanded short-term catastrophic health plans and health reimbursement accounts, which are part of high-deductible health plans. Much like AHPs, catastrophic health plans are seen as a way to offer cheaper coverage. People with catastrophic health plans pay more when they need services. In fact, catastrophic plans may not offer any help for some services. So, people in those plans are covered, but not at the same level as other plans.
Rita Numerof, co-founder and president of Numerof & Associates, recently told Healthcare Dive that more people enrolled in catastrophic health plans will lead to decreased utilization and lower short-term healthcare costs. However, in the long run, people in those plans may forgo care and medication because of cost. This could lead to more severe health issues, which will cause higher long-range costs.
Catastrophic plans currently make up a small percentage of the market. There were only about 110,000 people enrolled in catastrophic plans out of the 12.2 million people with ACA exchange plans altogether at the beginning of the year. A major reason so few currently have catastrophic plans is that the ACA limits eligibility to people under 30 and those with a hardship exemption or an affordability exemption. Trump’s order would open up the-short-term plans to more people, possibly everyone.
- Robert Wood Johnson Foundation State Options to Protect Consumers and Stabilize the Market