- A new report from the Society of Actuaries found the proposed expansion of association health plans will provide lower-cost coverage options but will also cause result in higher premiums in the individual market.
Between 3% and 10% of those in Affordable Care Act marketplace plans will leave for AHPs if the Trump administration's proposed rule is finalized. Those people are more likely to be young and healthy, so their absence will leave the marketplace plans with an unstable risk pool, according to the analysis published in The Actuary.
The report notes there is still uncertainty surrounding the proposal to expand AHPs, including “how many associations or issuers will form and market AHPs, and how other policy decisions, such as repeal of the ACA’s individual mandate penalty and the expansion of short-term limited duration insurance will affect the individual market.”
The Trump Administration wants to allow more small businesses, organizations and sole proprietors to band together and form AHPs. The thinking goes that AHPs will allow for greater bargaining power and lower healthcare costs for participants.
The proposed rule would allow small companies within a geographic area, even across state lines, to band together. An AHP would not be restricted to a “common interest,” such as operating in the same industry.
The proposal is one of the administration’s key planks, along with expanding short-term catastrophic health plans, to lower health plan costs and provide more choice.
AHPs could be an attractive alternative for young, healthy people who are paying more in the individual market to help offset the sicker members. “AHPs will likely be allowed to set premiums for policies that more accurately reflect the potential costs of older versus younger members, which should result in significant savings for younger individuals who move to AHPs,” according to the report.
The AHP proposal would let those plans avoid ACA regulations. For example, they wouldn't have to offer coverage for the 10 essential health benefits required in the ACA, which includes maternity care and prescription drugs.
AHPs were once seen as a health insurance option for millions of people and small employers. However, AHPs dropped in popularity after the ACA instituted consumer protections. The plans were required to be treated the same as individual and small-group market plans, and thus had to cover people with pre-existing conditions. These regulations increased the cost to offer AHPs.
The Kaiser Family Foundation said only 6% of employers with fewer than 250 employees offered health insurance through AHPs in 2017.
With many questions about the AHP proposal still remaining, it's tough to gauge exactly how the plans will affect the individual market. Factors that will influence the impact of AHPs include whether the final rule has a nondiscrimination provision, the specific criteria and standards for the plans, how much regulatory power states have and how associations and payers respond to the new rules.
The Actuary's report looked at how AHPs will affect the self-employed population, which made up 10% of all workers in 2015.
The report doesn't expect any impact on self-employed, low-income people who are eligible for subsidized ACA plans. However, among lower- to middle-class people (those between 250% and 400% of the federal poverty level), between 7% and 22% of the self-employed could move from an individual plan to an AHP.
People who aren't eligible for any ACA subsidies are much more likely to leave the individual market. The report found between 24% and 78% of those people will move to an AHP.