June 20, 2018

Trump admin releases final rule to expand association health plans

Daily Briefing

    The Trump administration on Tuesday unveiled a final rule intended to make it easier for small employers and certain self-employed individuals to form so-called "association health plans" (AHPs) to purchase insurance.

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    Rule details

    The final rule is similar to a proposed rule issued by the Department of Labor (DOL) in January. The rule aims to expand access to AHPs by broadening requirements regarding which types of employers are eligible to form an AHP.

    Current regulations require AHP members to be in the same industry and to be involved in day-to-day decisions of a business. Further, associations sponsoring health plans currently must exist for a reason beyond providing health insurance.

    However, the final rule will ease those requirements and instead allow employers in different industries to form an AHP if they reside in the same geographic region, even if that region includes more than one state. The rule also will allow self-employed individuals to form AHPs.

    In addition, AHPs under the rule will be considered large-group plans, which means they will be exempt from certain Affordable Care Act (ACA) regulations, such as the law's essential health benefit requirements. According to the Wall Street Journal, the rule will not permit AHPs to charge individuals more for coverage because of pre-existing medical conditions. However, the rule will allow AHPs to charge individuals more for coverage based on their age, employee classification, and industry, the Journal reports.

    A senior DOL official said the rule also will not permit AHPs to charge women more for coverage than men, but associations where females make up a majority of their employees could be charged more overall.

    Under the rule, fully funded health plans—in which insurers pay for members' claims—generally will be regulated by states in a manner similar to the way states regulate large employer health plans, the Journal reports. The rule will require self-funded plans—in which an association assumes the risk of paying for claims—to comply with provisions enacted in 1983 that give states the power to enforce insurance laws.

    The rule will allow AHPs to refuse coverage to self-employed individuals, the Journal reports. According to a DOL official, current AHPs will be grandfathered in, meaning they will not be affected by the rule's new requirements.

    According to the Washington Times, the rule's provisions will be phased in beginning Sept. 1.

    Implications

    Proponents of the rule say it will give U.S. residents access to lower-cost health plans. Senate Health, Education, Labor, and Pensions Committee Chair Lamar Alexander (R-Tenn.) during an interview before the rule's release said, "You may be able to buy a policy that's several thousand dollars cheaper," adding, "This is the most promising proposal for quality insurance for self-employed people who might make $60,000 to $70,000 but get no subsidies."

    Labor Secretary Alexander Acosta during a call with reporters Tuesday, said, "The Trump administration hopes to level the playing field between large companies and small businesses by expanding access to association health plans."

    According to the Journal, a DOL official said a recent federal analysis projected that an additional four million people would enroll in AHPs by 2023, including about 400,000 who currently are uninsured.

    But others have said the rule could cause premiums sold through the ACA's exchange to rise. An Avalere Health analysis released earlier this year estimated that the rule would lead between 2.4 million and 4.3 million individuals, particularly those who are healthy, to shift from individual or small group health plans in the ACA's exchanges to AHPs by 2022. As a result of that shift, researchers estimated that, by 2022, premiums would rise by between 2.7% and 4% for individual exchange plans and between 0.1% and 1.9% for small group plans. The researchers estimated the premium increases would lead between 130,000 and 140,000 individuals to become uninsured by 2022, when compared with projections under current regulations.

    However, the researchers also estimated that the rule would result in lower premiums for individuals who shift to AHPs. When compared with annual premiums in the ACA's exchanges, the researchers estimated annual premiums for new AHPs would be lower by between:

    • $8,700 and $10,800 for individual health plans; and
    • $1,900 and $4,100 for small group plans.

    The researchers attributed AHPs' lower premiums to less generous benefit offerings and healthier enrollees (Armour, Wall Street Journal, 6/19; Leonard, Washington Examiner, 6/19; Howell, Washington Times, 6/19; Pear, New York Times, 6/19; Dickson, Modern Healthcare, 6/19).

    Four principles for insurers to establish their health plan diplomacy

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