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Association Health Plans – Boon or Bust?

By FOCUS, A Leonine Business


In June, the Department of Labor, under a plan by the Trump Administration, announced the future adoption of final rules allowing for a major expansion of association health plans (AHPs) across the nation. Functionally, these plans will allow small businesses and self-employed individuals to band together and buy health insurance outside of the traditional Obamacare marketplace. On its face level, this seems to advance the non-partisan goal of greater access to affordable health care. However, it is the details of these plans that have once again pitted states against the federal government, and red states against blue states.


Controversially, AHPs are authorized to circumvent many of the Affordable Care Act’s (ACAs) mandates; most prominently they are not required to cover the ACA’s 10 essential health benefits, and may discriminate based on factors such as age, gender, geographic location and occupation. The omission of these protections is a key element that will allow AHPs to theoretically be offered at far lower rates than the existing ACA-compliant plans. Under the ACA, the availability of these types of plans was severely limited, however these new rules have significantly relaxed availability restrictions on their formation and availability. The rules are scheduled to take effect on August 20.


While the administration has claimed that the new plans will result in lower prices and expanded opportunities to purchase health insurance, including across state lines – a controversial practice in its own right – a litany of opponents are already lining up to challenge the new rules, including an unusual coalition of state-level Democrats and large business interests. These critics say that the lower premium prices for these plans come at a high cost, including less comprehensive coverage for enrollees, higher prices for those who remain on the traditional individual and small group markets, and destabilization of the existing markets.


Opposition to the rules has been quick to mobilize. Already, the attorneys general of 11 states and the District of Columbia have filed suit against the Department of Labor over the rules, claiming that by circumventing specific protections enshrined in the ACA, AHPs will “increase the risk of fraud to consumers, require the states to redirect significant enforcement resources to curb those risks, and jeopardize state efforts to protect their residents through stronger regulation.” The lawsuit seeks to have the rules thrown out wholesale and on a nationwide basis.


Individual state efforts against the plans are also taking shape. The state of Connecticut has outright barred the sale of AHPs, as state law explicitly prohibits the sale of any health plan that does not provide the ACA’s. New York and Vermont have also taken steps to limit their availability and overall impact on their respective insurance marketplaces. These moves constitute part of a larger trend among blue states of enshrining many of the ACA’s significant protections in state law, and in many cases strengthening the federal protections. Inversely, it also highlights a major trend in the opposite direction: following numerous attempts to repeal or invalidate the ACA wholesale, the new AHP rules represent another step in the piecemeal approach to undermining the act.


With prefiling already beginning for the 2019 legislative sessions, a strong rebuke against AHPs is expected to take hold in blue states, while red and Republican-leaning states will almost certainly embrace these plans by passing legislation to support their further expansion. Ultimately however, the most likely scenario seems to be that the administration’s attempts to undermine the ACA through the expansion of AHPs will backfire. Business groups and insurers have expressed little interest in AHPs, and some have predicted that the overall effect of AHPs will be minimal, citing little interest in the plans and a small level of predicted enrollment. However, the rules have already succeeded in emboldening states to pass their own protections against such plans, and will likely spur additional protections as a bulwark against any future federal action.