By Executive Order from President Trump, the Dept. of Labor has been instructed to draft language allowing for Association Health Plans. This will allow small employers and the self-employed to purchase health coverage based on “commonality of interest” as opposed to current regulations which require a common employer relationship.
This is potentially good news for the over 5.2 million businesses in the U.S. which employ less than 20 people, and the 10 million who are self-employed. Currently, many small employers and the self-employed feel at a disadvantage in the health insurance market place. They have not had the purchasing power of large employers. Therefore:
- Those with pre-existing conditions are often forced to pay high premiums based on individual claims experience.
- Many cost-saving plans and benefit options have often been unavailable for the sole-proprietor, self-employed or small employer group.
Yes, there already are a number of “sponsored” plans from various organizations currently on the market, such as local Chamber of Commerce plans. But these do not form one joint plan where all members receive the same rates or renewals based on the total association’s claims experience. Under possible changes, this segment of the workforce would be able to form or belong to associations for the purpose of purchasing group health insurance as a collective unit. The associations could be established on the basis of geography or interests and industry, i.e. national and state-wide groups or SICS classifications. This opens the door for new partially or fully self-funded plans with the purchasing power big employers currently enjoy.
But, There is a Hold-Up
But while these positive changes are on the horizon, it may be some time before the way is cleared to actually begin seeing Association Health Plans. Among other concerns, at issue is state versus federal jurisdiction over health insurance. Currently, with the exception of larger employer ERISA-type self-funded plans, states control health insurance plans sold within their boundaries. State insurance commissions require a “common employer relationship”, meaning small groups cannot band together to purchase health coverage based on common interests.
In a nutshell, this means that even if the D.O.L. were to suddenly allow association plans, individual states wouldn’t. To see an implementation of Association Health Plans, states first will have to give up their current jurisdiction or practices and adopt common, prescribed language making association health plans possible. This could take some time.
We’ll Let You Know
The staff at MBA Benefit Administrators has been following this development since it was first announced, even to the point of attending government seminars on the topic. But when the possibility of Association Health Plans was first announced, our staff correctly questioned the state vs. federal jurisdiction question, and we’ve uncovered a few other issues that will need to be worked out before association plans can be implemented.
We’re hopeful that the roadblocks can be worked out, and as closely as we’re following this we’ll be the first to let you know of any new developments. But there is promise on two fronts:
1. Small employers, sole proprietors and the self-employed will be able to reduce health coverage costs by using “big group” advantages, such as partially self-funded plans and The Open Solution pricing strategies.
2. Brokers will be instrumental in offering Association Health Plans to industries that typically have a smaller employee base, such as heating and cooling shops or small professional offices. Brokers and agents who are first in with these plans will not only gain new business but have the chance of keeping business because association members tend to be extremely loyal.
But don’t wait for AHPs to be finalized. If you happen to be reading this and are a larger employer (50+ lives) you can take advantage of our highly competitive partially self-funded plans now.
If you are a broker, let MBA Benefit Administrators provide a quote for your larger group business. The heralded benefits of association plans that the smaller employer is waiting for are available now for your larger group book of business.