The new regulations around association health plans (AHPs) — which loosen restrictions for small businesses, franchises and associations — create two distinct opportunities in the benefits industry.
The first is for brokers, who will be crucial advisors to employers eligible for the new coverage options now available.
The second opportunity is for benefits and HR tech vendors, who will be instrumental in managing the transactional and administrative challenges that would otherwise hinder AHP success.
What challenges do association health plans represent? Let’s consider an example — the Nashville Hot Chicken restaurant franchise.
Let’s say Nashville Hot Chicken has 1,000 franchisees, each with five full-time employees. Before AHP options became available to this organization, these five-employee groups would either have had to pursue small group coverage, or employees would have had to find individual plans.
Both options likely would have been prohibitively expensive for the organization or the employees. With the new AHP regulations, however, these 1,000 franchisees may be able to pull all 5,000 workers together and create a large group benefits plan.
In doing so, they would reap the advantages of collective purchasing, just like large groups do. However, this AHP would not work like a regular group plan.
If a regular group has 5,000 employees, they would all be part of a centrally-operated payroll system and the insurance companies would receive just one check for all of the employees enrolled at the group. But under an AHP of franchisees, all the payroll systems would operate independently, and there is no clear, centralized entity to pay carriers.
This creates a massive administrative headache for Nashville Hot Chicken corporate, as well as all the individual franchise owners. In other words, who is going to manage the AHP?
Here’s where the brokers come in. Employers need brokers to walk them through all the complexities of AHPs, including sourcing carriers, third-party vendors, and compliance needs.
It would also be incredibly impractical to manage 5,000 employees through 1,000 separate businesses without a benefits and HR platform.
But brokers can provide a solution to this challenge by adopting a platform. With a benefits and HR system, the various administrative differences from franchisee to franchisee can be accounted for, while still allowing the 5,000-life group to enroll in the group offering.
By removing the administrative headache, benefits tech makes AHPs a real option for Nashville Hot Chicken. But it also gives the tech-savvy broker a clear leg up on the competition. A broker without a tech solution will be at a severe disadvantage for Nashville Hot Chicken’s business compared to a broker who has a platform.
So as small employers, franchisees and industry associations band together for group coverage, benefits tech can give brokers a competitive differentiator for this new business segment.