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What Are Association Health Plans?

Association health plans are a type of health insurance that’s offered by, and tailored for, like-minded people.

May 14, 2018 - By Hal Levy - read

Association health plans are a type of health insurance that’s offered by, and tailored for, like-minded people. Click To Tweet
  • Until now, only specific groups (“associations”) could create and join association plans – in 2019, almost any group of people can.
  • Designed and priced to serve the needs of a group – like waiters, mothers, or 25-year-olds.
  • Plan designs are different than Obamacare – no “metal levels”.
  • Another form of mainstream healthcare – AHPs legally count as minimum essential coverage.

Association health plans (AHPs) are a type of customized health insurance that some employers love. New rule changes mean that AHPs will get another chance at acceptance.

What Are Association Health Plans (AHPs)?

Association health plans are a type of health insurance that’s offered by, and tailored for, like-minded people.

For instance, if you work in a restaurant, you might want a group of restaurants to create a food industry association health plan. Their plan could make it particularly easy for you to take care of burns and slips.

If you work as a florist, you might get an AHP that has great coverage for, say, venus flytrap attacks. Or if you own a car dealership and provide healthcare to your employees, you could connect with other car dealerships to do the same thing.

doctors and bill dude | association health plans | HealthCare.com

AHPs Include Health Insurance Basics

Association health plans work like traditional, major medical health insurance. When you join, you should expect to receive a familiar membership card.

Most association plans partner with a larger health insurer’s network of doctors. You may be familiar with how smaller cell phone companies rent and resell minutes from AT&T. Similarly, your association plan can provide low rates by paying for members’ care in bulk.

AHPs Will Have Price Flexibility

Association health plans will be able to set different monthly prices (known as premiums) based on risk characteristics like age, gender and lifestyle factors.

The Affordable Care Act (ACA) prevented most health plans from using those characteristics to determine premiums. In response to the ACA’s strict guidelines, insurance companies generally charged all their members as if each one spent an enormous amount on medical care.

Association health plans will regain more flexibility to set monthly premiums on an individual basis. As a result, younger and healthier Americans will generally pay less to use an association health plan instead of an Obamacare plan. However, Obamacare plans do include hefty subsidies for those with low incomes.

AHPs will not be allowed to deny membership or charge different prices based on protected characteristics like race or religion. They can’t charge someone more for being sick, or exclude coverage for a pre-existing condition.

AHPs Will Come With New Plan Designs

Association health plans can be designed in a way that appeals to certain groups more than others. Some plans will offer skimpy coverage for prescription drugs, but better coverage for annual checkups.

In this way, AHPs may draw healthy members away from their current coverage. Obamacare plans and employer-based insurance will continue to appeal more to Americans with chronic conditions.

AHPs Will Be Easier To Join

To prevent people from waiting to buy insurance until they’re sick, Affordable Care Act plans are only open to new members during the 6-week Open Enrollment Period. Once Open Enrollment ends, many people have no choice but to buy temporary health insurance. Some even go without coverage at all.

In contrast, association health plans will be easier to access at all times.

AHPs Follow Older Insurance Rules

AHPs will qualify as minimum essential coverage under the Affordable Care Act, so you or your business won’t have to pay a tax penalty for relying on them. Yet unlike most health coverage that you can buy on your own, association health plans are not regulated by the ACA and the Department of Health and Human Services.

Instead, some rules for association plans are reviewed by the Department of Labor. Since AHPs are funded by employers, they are considered Multiple Employer Welfare Arrangements (MEWAs) under an older federal law known as ERISA. Other AHP rules may fall under state regulation instead of the federal government.

As such, association health plans can offer different (or fewer) benefits than ACA plans. AHPs don’t have to follow as many rules as ACA plans currently do.

AHPs Work Across State Lines

Association plans are regulated in their home state but can market to other states in some instances. So, a state in which other plans must abide by community rating – that is, charging all members the same regardless of age or other characteristics – can be powerless to keep out lower-cost AHPs.

While there are nationwide consumer protection laws that apply to association health plans, many state laws avoid the subject of AHPs. AHPs may not have to meet the stricter financial stability requirements of most other insurance plans, or follow local complaint resolution laws, or follow state guidelines for adequate doctor access.

Background of Association Health Plans

Association health plans have been around for years, but fell out of favor in the 1990s. Colorado even banned the creation of new AHPs within its borders, citing scams and false claims coming from the plans themselves.

Association plans that served large groups of people instead of narrow professional organizations used to be called “fake AHPs,” because they served “air breathers” or “weight lifters.”

The 2014 Affordable Care Act was the final straw for many AHPs. They virtually disappeared from public view once individual health insurance became easier to find on the net.

Bringing association plans back is part of the ongoing political struggle over American health insurance. In October 2017, in the wake of an unsuccessful attempt to repeal Obamacare, the White House announced several proposals for national healthcare policy – including the expansion of AHPs.

Those who care about Trumpcare could consider AHPs to be the small business aspect of the Trump health plan. The White House intends to loosen the rules around AHPs until they are more attractive than Obamacare, instead of changing Obamacare itself.

Association Health Plan Executive Order

The Trump administration has sought to make it easier to join AHPs by using an Executive Order. Executive Orders take a long time to finish and put in place.

Among other changes, the Executive Order orders the Department of Labor to expand the legal definition of “employers” and “employees”. Since association health plans are created for employees, this expands the number of people who can join AHPs.

Separately, the same Executive Order would also make it easier to get short-term health insurance.

AHPs Are Common

Very common, actually. In 2017, over 60 percent of employees were in self-funded plans like association health plans. The Kaiser Family Foundation estimates that 6 percent of small businesses offered association health plans to their employees.association health plans | pill price tag

What Are The Advantages of AHPs?👍

✅ AHPs Avoid Expensive Obamacare Requirements

Association health plans don’t have to stick to many of the ACA’s rules.

  • AHPs can avoid the fees that individual health insurance has to pay, like:
    • subsidizing their ACA competitors (“risk adjustment”)
    • extra payment help for some low-income doctor visits (“cost-sharing reductions”, which used to be paid by the federal government, but are now borne by insurers),
    • charging younger enrollees the same as older enrollees (“age banding”).
  • AHPs don’t have to be based around “metal levels”, which set easy-to-understand but inflexible coinsurance amounts.
  • AHPs don’t have to file as much paperwork as plans that are listed on the federal government’s health insurance website.

✅ AHPs Don’t Pay for Unnecessary Care

Association health plans don’t have to cover Obamacare’s essential health benefits. Most health plans have had to cover each of these 10 important types of care – like emergency services and rehabilitation – since 2014.

Opponents of mandatory essential health benefits are dislike that the benefits are one-size-fits-all. For instance, EHBs require men have to pay for unused maternity care. And essential health benefits are not always covered well – they’re simply covered. Much of the cost-sharing burden can still be on the plan member and not the plan, for services that are incompletely covered with few doctors available.

✅ AHPs Work With HSAs and Existing Health Tools

Other parts of the health system are compatible with association plans. If you have a health savings account (HSA), you can use it to pay for AHP medical expenses just as you would with any other insurance plan. Doctors offices don’t care what type of insurance you have. And association plans still have to play by fair rules, like no illegal discrimination or pre-existing condition exclusions.

✅ AHPs Expand Your Range of Healthcare Options

It’s important to have more choice in the unfriendly health insurance market. In theory, making AHPs larger can efficiently distribute risk and bring down costs for everyone. But that’s something we’ve heard in each round of American health reform, with little success.

What Are Some AHP Criticisms? 👎

❌ AHPs Don’t Focus On Consumer Protection

Association health plans don’t have to spend 80 percent or more of their monthly premiums on medical care, but ACA plans do. This risks creating AHPs that offer unusually poor medical benefits, or spend excessively on administrative costs.

❌ AHPs Weaken the Obamacare Market

As more people move to Obamacare alternatives and plans from large employers, the Obamacare market becomes less competitive. AHPs will accelerate this trend. Experts believe that the average spending per person who remains on an ACA plan will increase by 1.4 to 4.4 percent, and that their monthly premiums would increase as well.

❌ AHPs Avoid Essential Health Benefits

Due to the way association health plans are funded, they don’t have to cover essential health benefits. Affordable Care Act plans have had to cover each of these 10 important types of care – like emergency services and rehabilitation – since 2014.

Supporters of essential health benefits contend the benefits are necessary so that people don’t encounter unexpected gaps in their health insurance. Advocates say that the existence of these benefits lowers prices for everyone, since health insurance is less expensive overall when it covers everything. The AHP model risks everyone paying more for any of the less common services they’ll eventually need.

Current Events for Association Health Plans

Association health plans are in the news like never before. According to the most recent comments from Secretary of Labor Alex Acosta: new rules for AHPs will be finalized, signed by President Trump, and effective in summer 2018. Plans will probably not be ready to start by 2019, but they could easily enroll members for 2020.

According to a study from the Society of Actuaries, 3 to 10 percent of people with individual Obamacare plans will join an AHP if the Executive Order goes into effect. Researchers expect that between 13 to 43 percent of self-employed people will choose to join an AHP. Additionally, up to 60 percent of people on Obamacare’s catastrophic coverage level may move to AHPs.

How Can I Enroll in an Association Health Plan?

The changes that will make association health plans easier to join have not been finalized yet. Once the rules are in place, insurance markets will take time to get up and running.

For now, your employer will probably let you know if they offer an AHP. AHPs are not readily available to individual consumers at the moment.

If you’re looking forward to joining an association health plan, it may be easy to get one in the future. In the meantime, you’ll want to compare Affordable Care Act coverage or temporary health insurance options from a trustworthy national site like HealthCare.com.

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