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New Life for Association Health Plans?

New Life for Association Health Plans?

Amidst the turmoil of the non-vote on the American Healthcare Act, the U.S. House of Representatives passed legislation that would make it easier for small businesses to purchase coverage through Association Health Plans (AHPs). The Small Business Health Fairness Act, passed on March 22nd, now moves to the Senate. Should this legislation take effect as written, it could offer a new way for small businesses to purchase health insurance and if widely adopted, could affect small group markets across the country.

AHPs under this new legislation would be federally, not state, certified, would permit small businesses that are members of trade and professional associations to purchase coverage as one large group or self-fund as one large group, and would need to be in compliance with ERISA, but not with the small group requirements of the ACA or state regulations.

Proponents of the Small Business Health Fairness Act argue that small business associations could negotiate lower rates because they would have the same purchasing power as large companies and could (via this legislation) purchase coverage across state lines where more coverage options are available.

Opponents argue that by allowing associations to offer plans that need not comply with the ACA’s small group mandates (community rating, essential health benefits, no lifetime caps, etc.) and that are no longer regulated by the states (whose standards are typically more stringent), small employers and their employees will be purchasing sub-standard plans and will have fewer protections against insurer fraud and insolvency. They also argue that the traditional small employer pool could be destabilized as healthier groups purchase coverage through less-rich association plans, leaving less healthy groups in the traditional small group market.

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