Health Association Plans and the ACA

Affordable Care Act

Health Association Plans and the ACA

Published on July 09, 2018

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Perhaps of all the policies affecting health insurance in the United States, few have had as profound an impact as the Patient Protection and Affordable Care Act. Nicknamed “Obamacare” by supporters and critics alike, this law has dramatically changed how Americans buy insurance in the past few years, as well as what options they have for getting it.
A recent decision by the Trump Administration is broadening the options for small business health insurance, which could result in the Affordable Care Act’s Obamacare exchanges taking a serious hit. The new regulations of Association Health Plans (AHPs) provide an alternative option for affordable coverage, though at the risk of undermining critical parts of the original law.

What are association health plans?

Association health plans are a form of health insurance that covers groups of small businesses and individuals. Typically used by industry associations, professional organizations, chambers of commerce, and other institutions associated with a certain line of work, these plans offer greater flexibility over what and who is covered. In particular, they do not require businesses to cover all the same health issues that must covered under ACA marketplace plans.
Over the past year, the Trump Administration has taken a number of steps to promote association health plans, making changes that will make joining an AHP easier. In particular, it issued an executive order in October of 2017 that encouraged more employers to create and join these associations with other businesses in their industry or in close proximity to them. Then in June of this year, the White House released official rules to back up this order. It established that association health plans will be regulated in the same way that large employer plans are, and that they need not cover the ten essential benefits specified under the Affordable Care Act.

How will association health plans change the ACA?

Trump Administration officials have argued that by promoting association health plans, they are giving small businesses more options to obtain affordable, comprehensive coverage. But there is also evidence that this initiative will weaken the Affordable Care Act and destabilize the insurance plans purchased through it. In particular, the law is expected to:

  • Raise Obamacare Prices– Because association health plans don’t cover as many benefits, they tend to be cheaper than those purchased under the Affordable Care Act exchanges. As a result, young, healthy people are more likely to sign up for them than people who require more care. This means that the people who remain on Affordable Care Act plans will tend to be less healthy than those who sign up for association health plans. Over time, this is likely to raise the price of ACA policies.
  • Create Differential Premiums– Under the Affordable Care Act, health insurers cannot charge higher premiums to women than to men, and they can’t use different prices for different industries. There are also limits on how much they can base their prices on enrollees’ age. But there are no such restrictions on association plans. There is thus a risk that this step will open the door for insurers to start charging higher prices to women, older enrollees, and enrollees in certain industries.
  • Reduce Maternity Benefits– Besides being able to charge women higher prices than men, association plans don’t have to offer maternity benefits. This could cause financial problems for any women who are enrolled in these plans, as well as for their families.
  • Raise Legitimacy Concerns– Health industry regulators are often wary of association plans, which they claim are more vulnerable to insolvency and fraud. Many worry that by loosening Federal restrictions on these plans, this initiative is making consumers more vulnerable to illegitimate insurance.

Although the Trump Administration has granted greater autonomy to association plans, it has not allowed them to charge higher premiums based on enrollees’ health status. It also hasn’t changed state regulators’ jurisdiction over these plans, so state-level authorities can continue to take action against fraudulent and insolvent policies. Ultimately, it remains to be seen how powerful an effect this measure will be, or whether it is ultimately for the better or the worse. For more information on these and other developments that affect your access to health insurance, visit eHealth today.

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