What Are “Association Health Plans?”

Last October President Trump signed an Executive Order to expand access to Association Health Plans [AHPs]- or “Skinny Insurance.”

Tuesday (the same day the Labor Department finalized the Rule) President Trump promised small business owners that by escaping “some of Obamacare’s most burdensome mandates … you’re going to save massive amounts of money and have much better healthcare…  You’re going to save a fortune, and you’re going to be able to give yourselves and your employees [sic] tremendous healthcare.”

These “skinny” policies may be available as early as September. Within a few years, the Congressional Budget Office [CBO] projects that AHPs will provide coverage to more than four million Americans.

Will one of them be you?

The lower price tag of these policies will be attractive- but what will you be buying? Will “Skinny” Insurance cover what you need? Will it cover you if you get sick or injured?

Association Health Plans [AHPs] date back decades (after numerous bankruptcies and cases involving fraud, federal regulation almost eradicated AHPs in the 1990s).*

AHPs are policies offered to members of sufficiently-related associations or groups of small businesses- such as professional organizations or industry groups, trade organizations, or chambers of commerce. They differ in format and reach and therefore may or may not be subject to state insurance regulations. Technically, some are not insurance products.

They remained a sliver of the insurance market when the Affordable Care Act (Obamacare) was signed in 2010 and continued after the law for a limited number of entities.

Because the ACA’s requirements do not extend to AHPs, they operate exempt from Obamacare regulations on coverage minimums (“essential health benefits”) and limitations on insurance practices. The allowances they enjoy make them cheaper.

Up until now, AHPs have not been an option for most small businesses. However, in October President Trump directed the Labor Department to expand their availability.

Under the new Rule unrelated small Main Street businesses, entrepreneurs and sole proprietors, plumbers, artists and other self-employed people can now “band together to purchase insurance as an AHP.

AHPs Will Destabilize the Exchanges & Individual Insurance Market

Cheaper policies offered through AHPs will undoubtedly attract younger, healthier (and lower risk) people from the Obamacare Marketplaces (also called “Exchanges”). As the Marketplace pools become smaller and more predominantly older people and people with health issues, ACA premiums will continue to rise. That escalation further threatens the design of Obamacare. Undermining Obamacare is a concern or a celebration depending on how you feel about the law.

But AHPs will lead to higher premiums and instability in the traditional small-group market as well, which is why small business groups are also expressing concern.

Small Business Majority founder and CEO John Arensmeyer criticized Tuesday’s Final Rule, saying the Trump Administration is doing “all it can to undermine the [ACA] regardless of the consequences… this will cause the insurance market for small businesses to split in two, leading to major spikes in premiums for small firms that remain in the small group market.”

Similarly, consumer groups, state officials and Blue Cross Blue Shield plans are against the Trump initiative. Association Health Plans will “tend to attract employers with younger, healthier workers, leaving behind sicker people in more comprehensive, more expensive plans that fully comply with the Affordable Care Act.” [citation]

The business, government and political implications of AHPs are important, but the far more pressing issue is whether these plans are good for the people who carry them. To address that question we have to look at the “skinny” moniker they often carry in the press and public.

Is “Skinny” Good for You?

The “Skinny” label is a comparison between health insurance policies that must provide “Essential Health Benefits” under Obamacare- and AHPs, which do not.

Conditions and circumstances that are most likely to be exempted from AHP coverage include mental health care, substance abuse treatment, emergency services, maternity and newborn care, and prescription drugs.

These are coverage limitations that will severely impact the healthiest AHP participants. What if they get sick? Without any of the cost controls required by the ACA the premiums could increase as the patient’s health decreases so that a person (for example) with cancer could face “ever-increasing premiums for comprehensive coverage.” [citation]

It is the lack of consumer protections that most concern critics of Association Health Plans, including the American Hospital Association (AHA) and America’s Health Insurance Plans (AHIP).

Details of each AHP will vary, but buyers need to be aware that the insurance they provide is not comparable to the coverage they have enjoyed in the past.

Any insurance is better than no insurance

Because coverage is so closely related to health, it is undoubtedly true that any insurance is better than no insurance. It is important to note that people do not buy insufficient insurance because they want to- they buy the policy they can afford.

Many people will opt for the cheaper, inadequate insurance they are offered through an AHP in the months to come because they have no choice.

Remember that when you hear politicians celebrating these “tremendous healthcare” plans in the weeks to come.

*It is interesting to know in the middle of the media frenzy about the “new” AHPs that efforts to create federally-recognized AHPs that would be exempt from State regulation date to the late 1990s.

Want to Know More:

To understand AHPs it is helpful to know more about the essential health benefits that other plans are required under Obamacare to include. Here is a resource from AARP and another from Families USA.

If you find insurance confusing (who doesn’t!) here are introductions to the topic from Medical News Today, US News and World Report, and the Urban Institute.