For all the dire warnings about the new association health plans (AHPs) that were enabled under an updated U.S. Department of Labor rule last summer, they actually may be just what the doctor ordered for small businesses (along with sole proprietors and the self-employed).
That doesn’t mean there aren’t provisos. But AHPs are gaining traction as they trend toward offering comprehensive benefits and double digit cost savings, according AssociationHealthPlans.com data. If such trends hold, they’ll go a long way toward countering concerns that the plans would provide neither while putting consumers at risk of fraudulent action by new groups entering the market.
Today’s iteration of AHPs began as a result of the updated Labor Department rule making it easier for small businesses to join together to offer the same type of health insurance coverage offered by large companies. It applies to small businesses that share a professional similarity or the same business region. Although a recent court ruling overturned the expanded regulations, several such programs have been formed and continue to operate, showing the potential of plans to meet the needs and demands of those they serve. According to AssociationHealthPlans.com:
- Of new AHPs launched, 71 percent were by regional associations. The most common sponsors, four out of five, were chambers of commerce.
- The majority, 86 percent, are fully insured, versus being self-funded.
- Maximum savings claims among self-funded AHPs averaged 29 percent versus 23 percent for fully insured plans. (However, claims will vary considerably vis a vis non-AHP plans.)
- Of the new AHPs, 43 percent are available to the self-employed and sole proprietors.
- Half of the new plans include a medical savings account option.
For all the concern expressed over AHPs—in addition to opposition from groups like the American Medical Association, 11 states sued over the rule change—they provide a health care solution many have been looking for.
Tennessee REALTORS® recently launched one of the first AHPs for a professional association under the new rules after a survey of members showed strong interest in the kinds of benefits that could be provided. The group has 21 local chapters and 29,000 members statewide.
Membership of the group (full disclosure: a HUB International client) has the classic profile of the types of small businesses whose interests are underserved in the current health care marketplace—1099 contractors, W2 employees and sole proprietorships/partners and owners. The survey found 94 percent were interested in accessing benefits through a Tennessee REALTORS® sponsored AHP; 50 percent identified as individuals who believed they were paying too much for their health care coverage.
The fully insured AHP solution offers a robust range of options for members, their employees and dependents. That includes three different medical plan options; a dental and vision option; and wellness solutions. Non-medical benefits also are offered, such as accident with a disability insurance rider, critical illness and life insurance with a long-term care rider. Premiums are competitive in a state where prices, on the whole, stabilized or declined for 2019 after years of double digit increases.
In addition to opening the doors for small businesses to previously inaccessible, big business-type benefits, AHPs can make a difference in environments that lack competition for health plans. Take Nebraska, with a single insurer offering coverage on the ACA exchange that had a 9.1 percent jump in the 2019 premium of its second lowest cost silver plan to $686 before subsidies.
It’s made AHPs such as Land O’Lakes, a farmer-owned cooperative, welcome. Its self-insured plan is expanding across state lines with the new rule, offering savings of 25 percent to 35 percent over Nebraska’s exchange plans and 10 percent to 12 percent over comparable plans in Minnesota’s.
Are AHPs the panacea for small businesses in search of adequate or better medical coverage at affordable rates? As in everything else, the rule of “caveat emptor” applies. Not every plan, its structure or lineup of benefits and fees will be equal. It pays to read the fine print. Small businesses whose states allow them and that believe their companies and employees might benefit by joining one should start the process by investigating along three lines of inquiry:
1. AHP membership parameters
- Who will be invited to join?
- What are the terms for adding new members?
- What are the rules over leaving the AHP pool?
2. Health plan options and benefits covered
- What specific health plan options are included in the AHP?
- How does this affect your competitive advantage when hiring new employees or retaining current workers?
Consider establishing some benchmarks for competitive comparison. Cost is important, but so are other factors. In balancing benefits and costs, for example, weigh things like the menu of services for the cost, out-of-pocket maximums and how the pharmacy benefit is structured. Customer service is key, too, like turnaround on claims
3. Added costs of administration
- What’s the cost to administer an AHP?
- Who will be responsible for paying this cost?
- Who can counsel you to navigate and understand costs/fees?
Today’s new and improved Association Health Plans are still a work in progress. But designed with a critical eye toward all the elements that successfully come together in best-of-class health plans – not just price, but value in terms of holistic and forward-thinking benefits and services – they may give a positive boost to our pressured health care system.
Margaret Collignon is vice president of employee benefits at HUB International, and Matt Cowan is president of Tennessee Operations.