By Colleen Becker and Dick Cauchi
Four months after announcing new plans to allow consumers to buy insurance across state lines, the Trump administration has issued details through proposed rules.
The initiative would allow individuals and small employers to form professional or trade associations and enroll in federally redefined Association Health Plans (AHPs). Such plans typically provide health coverage for a group of businesses that share some common interest.
They became popular with states during the 1990s, and they gave small businesses within an area the ability to pool employees and spread risk, with the hope of reducing costs. However, this approach was no panacea – for example in 1992 at least two dozen states reported association plans had committed, “fraud, embezzlement or other criminal violations.”
At the core of the proposed rules, AHPs could sell insurance across state lines, and operate in multiple states. Proponents herald them as an opportunity to give consumers more choice and drive down costs. Opponents say not so fast. They fear consumers could actually be worse off and states would lose their traditional authority over regulating such plans.
Under the Affordable Care Act (ACA), individuals and small businesses can still obtain coverage through an AHP, however, the plans generally remain subject to the same rules as others in the individual and small group market. The proposed rules would treat AHPs like large-employer federal Employee Retirement Income Security Act (ERISA) plans, which are exempt from many existing ACA requirements, and potentially from state insurance regulations and oversight.
Historically, Association Health Plans have received minimal federal oversight, while giving individual states broad authority to regulate and oversee them and their activities. Under the new rule, AHPs would be exempt from many of the consumer protections that the federal ACA provides and that most states enforce.
For example, AHPs are not required to cover essential health benefits such as mental health services, prescription drugs, and oral and vision care for pediatric patients. Additionally, AHPs would not be subject to the premium rate restrictions of the ACA, nor would they be required to use the ACA’s rules in determining eligibility. Although AHPs would not be able to use ‘health status’ as a criterion of plan eligibility, rate setting and benefit design, they would be able to use factors such as gender or occupation to vary rates.
Find out more about this issue and state insurance regulators’ concerns in an educational teleconference, hosted by The Commonwealth Fund on Jan. 25. Two of the three expert presenters previously served as state insurance commissioners in Rhode Island and Maine: Chris Koller, president of the Milbank Memorial Fund and Mila Kofman, now the director of the Health Marketplace in D.C. Also on the panel was Kevin Lucia, project director at Georgetown University's Health Policy Institute.
While it was acknowledged that there are legitimate AHPs that offer health insurance products to their members, there are certain elements of the proposed federal approach to AHPs that could increase the risk of fraud, insolvency and market instability. Koller pointed out that the biggest risk could well be that individuals and small business owners could sign up with an AHP that becomes insolvent. Mila Kofman went on to say that, in the past, AHPs have been susceptible to fraud and, if promulgated, the new rule will, “open the door to scams.” Lucia added, “this would also give AHPs the ability to ‘cherry-pick’ healthy individuals from the larger current risk pool, potentially destabilizing the individual market.”
The deadline for formal written comments by state policymakers and others on the proposed federal rule is on or before March 6. NCSL has extensive information on earlier state actions concerning out-of-state purchasing insurance and the recent developments and discussion for (and against) nationwide associations.
Listen to the teleconference audio, and check out the related Commonwealth Fund brief on AHPs.
Material in this blog includes the views of presenters and authors, and does not constitute a position by NCSL
Colleen Becker and Richard Cauchi cover health insurance for NCSL’s Health Program in Denver.
Email Colleen. Email Richard.