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Trump Administration Finalizes Policy to Expand Use of Association Health Plans; Concerns Raised About the Effect on the ACA Insurance Marketplaces

June 20, 2018

Newly finalized policy will expand the ability for employers to join together in an employer group or association to offer employer-sponsored health care coverage through “association health plans” (AHP).

These plans would be offered outside of the Affordable Care Act (ACA) markets. AHPs may provide less expensive coverage options, but will not necessarily offer the full patient protections and benefits assured under the ACA. AHP policies are not required to comply with the requirement to cover the ACA’s “essential health benefits,” but AHPs are subject to consumer protections that apply to large businesses, including pre-existing condition protections.

Specifically, the final rule issued by the U.S. Department of Labor modifies the definition of "employer" under the federal ERISA law. More individuals are eligible to participate in association health plans based on geography or industry. The rule will permit employers to form AHPs by city, county, state, or multi-state metropolitan areas. Employers also can form nationwide AHPs for businesses in their specific industry. Additionally, the policy will allow small business owners without employees, including sole proprietors, to join AHPs.

The Administration has advocated for expanding access to alternative insurance options to the comprehensive coverage offered under ACA requirements. Of concern, many coverage advocates have cautioned that healthier consumers will take advantage of less-costly, less-generous coverage, leaving the sicker and higher-cost patients to secure coverage through ACA plans. Such a shift will undermine the ACA insurance marketplaces.

The Commonwealth of Pennsylvania submitted comments during March in response to the proposed rule. In the comment letter, Insurance Commissioner Jessica Altman expressed concern that AHPs would not have to meet coverage requirements under the ACA for minimum essential health benefits and prescription drugs. The Commissioner cautioned that the policy could destabilize the market.

Commissioner Altman stated, “If association health plans are exempt from state regulation and oversight, they could cherry-pick healthier risks. The rule could lead to younger, healthier consumers leaving the individual and small group markets, which would inevitably increase premiums for those still in those markets.”

HAP and Pennsylvania hospitals embrace the importance of expanding access to meaningful coverage. The ACA has been instrumental in:

  • Supporting more than 1.1 million Pennsylvanians through health insurance coverage
  • Providing better access to health care services
  • Dramatically reducing the uninsured population in Pennsylvania

HAP will continue to advocate for policy that advances those outcomes and will work with the state to ensure Pennsylvania consumers are protected.

The provisions of the AHP rule will go into effect on a rolling basis between September 1, 2018, and April 1, 2019. Timing will depend on whether the AHP is existing or new, and whether the plan will be self-funded or fully insured.

If you have any questions relating to this issue, and the impact of coverage, please contact Jeff Bechtel, HAP’s senior vice president, health economics and policy. Questions about HAP’s federal advocacy efforts should be directed to Laura Stevens Kent, HAP’s vice president, federal advocacy.

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