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November 16, 2018

Critics warned that association health plans could undermine the ACA. Is that happening?

Daily Briefing

    It has been more than two months since the Trump administration's expanded association health plans (AHPs) hit the market—and coverage, at least in Nebraska, is more comprehensive than state officials and industry analysts initially feared, Modern Healthcare reports.

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    About AHPs—and how they changed under Trump

    As of Sept. 1, employers and self-employed individuals in different industries are eligible to form an AHP if they reside in the same geographic region, even if that region includes more than one state.

    AHPs under a rule the administration finalized in June are considered large-group plans, which means they are exempt from certain Affordable Care Act (ACA) regulations, such as the law's essential health benefit requirements. AHPs are not permitted to charge individuals more for coverage because of pre-existing medical conditions. However, they can charge individuals more for coverage based on their age, employee classification, and industry.

    The rule sparked concerns that it could result in less comprehensive coverage offerings, and in June a group of Democratic attorneys general (AGs) from 11 states and the District of Columbia challenged the rule in court. They argued that the final rule "exempt[s] a significant portion of the health insurance market from the [ACA]'s consumer protections."

    So what do the association health plans look like?

    But according to a Modern Healthcare analysis of AHPs in Nebraska, where Medica is the only insurer selling health coverage on the exchange market, many of those concerns have not been borne out.

    Modern Healthcare found Land O' Lakes, multiple Nevada chambers of commerce, and the National Restaurant Association all have formed AHPs—including HMOs, PPOs, and point of service plans—under the new rule. The organizations said they opted to do so to provide employees and small business with additional health coverage options better suited to their needs than individual and small-market health plans.

    According to Modern Healthcare, most of the AHPs in Nebraska claim to:

    • Allow individuals with pre-existing conditions to enroll in coverage without charging them higher premiums;
    • Impose no annual or lifetime limits on coverage;
    • Offer access to a broad network of physicians;
    • Offer a range of deductibles; and
    • Offer coverage for most or all of the services under the ACA's essential health benefits requirement.

    On top of that, HMO premiums for the plans in some cases are up to 15% to 25% lower than comparable plans on the exchange, according to Modern Healthcare.

    For example, Scott Muelrath—CEO of the Henderson Chamber of Commerce, which formed AHPs with other chambers of commerce—said, "[W]e expect to see savings up to 15% on premiums with this [AHP] opportunity." Muelrath said UnitedHealthcare, which is administering the plans, will charge lower premiums because the AHP can attract a larger volume of enrollees. According to Modern Healthcare, premiums will vary based on an enrollee's age, occupation, and location. Daily Briefing is published by Advisory Board Research, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group. UnitedHealth Group separately owns UnitedHealthcare.

    Pamela Grove—senior director of benefits for Land O'Lakes, a farmer-owned cooperative—similarly said their self-insured AHP's size allowed it offer premiums that are about 25% to 35% less than the premiums for exchange plans sold in Nebraska. The plan, which is open to 44,000 farmer in Nebraska and Minnesota, will vary premiums based on ZIP code and age, and older enrollees will pay up to four times more than younger enrollees.


    Chris Condeluci, a health policy consultant who helped Land O'Lakes with its AHP, said, "Critics have done a very good job of messaging that [AHPs] are going to offer skimpy coverage, but the facts to date do not corroborate that claim."

    However, Sabrina Corlette, a health insurance expert at Georgetown University, cautioned that it is possible AHPs could claim to cover the ACA's essential health benefits but still fail to meet federal standards.

    Bruce Ramge, Nebraska's insurance director, spoke to a different concern raised by critics: that AHPs could drive healthy individuals away from the exchange market, causing premiums there to rise. Ramge argued, however, that such an outcome is unlikely because most individuals with exchange plans receive subsidies to pay for their coverage. Ramge believes AHPs will attract individuals who do not qualify for federal subsidies (Livingston, Modern Healthcare, 11/10; Baker, "Vitals," Axios, 11/13; Meyer, Modern Healthcare, 8/17).

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