Overview of Association Health Plans
Pros Association Health Plans (AHPs) 1) Reduce overhead/administrative cost by 30% (GAO estimate) of health coverage for small business by enabling small employers (less than 100 workers) to pool their buying power. Simplifies state/federal regulatory oversight.
Cons 1)Incompatible/inconsistent state laws make coverage expensive. 2)Increased risk segmentation: resulting in a 2 tier systemAHPs for younger, healthier groups; state-regulated insurers for older, sicker groups. Result is premium hikes for outliers, and preferential treatment of AHPs, which enjoy state mandate exemption & rating restrictions. 3) Re-underwriting when employee becomes ill charge employers higher rates for sicker employee, increasing the initial enrollment rate. 4)Risk to consumers: Fraud/insolvency by unlicensed insurance companies. 5) Does eliminating statemandated benefits really reduce health care costs? Large employers tend to offer most benefit covered by state mandates.
Structure/Models
Federal Legislative Prospects. 1)The "Small Business Health Fairness Act 2003 " (HR 660). Introduced 2/11/03. Includes federal certification standards and oversight by DOL’s EBSA (formerly PWBA) so that all AHPs are regulated under a singe set of federal rules. Sponsored by Rep. Ernest Fletcher (R-KY) House Education and the Workforce Chairman Boehner (ROH).
Speakers 1) Elliot Wicks, Economic & Social Research Institute 2)Len Nicols, PH.D., Center for Studying Health System Changesupports allowing small employers/purchasing coalition to buy into state employee benefit plans or Medicaid/SCHIPS providing greater options, reduced administrative costs, and large purchasing pools.
1)AHPs and Healthmarts are private entities which have few organization and governing constraints compared to HIPCs, which usually are subject to stricter rules for pricing, offerings and selection. 2)AHPs can restrict purchasers to membership criteria. Past AHP legislation required the membership organization to be in existence for three years prior to developing/offering an AHP and that the group was created for non-insurance purposes (the AHP can’t be only mission/goal/reason). 3) Can offer products of a single insurer, no competition required. This can result in greater buy-in, marketing, sales and economies of scale.
2)Increased flexibility by allowing employers to obtain coverage that is exempt from state benefit mandates. But under House and Senate bills, must comply with HIPAA. 3) Authorize various forms of pooled purchasing for small groups and individuals
2) Sen. Olympia Snowe, (R-ME), chair of Senate Small Business Committee introduced the week of March 6, the Senate version of pending House bill. Outlook: Given the President’s support and commitment to increased access via a variety of models, GOP congressional leadership seems more likely to pass AHP legislation this year.
5) Allows self-insured coverage, subject to reduced solvency protections/requirements compared to state requirements. Solvency standards still in place but more flexible by allowing stop loss coverage or reinsurance instead of cash reserves. 6) Stringent state insurance rating rules do no apply to AHPs. Allows insurance rates to be set based on the claims experience generated by each association pool rather than as part of the regular small-group rating structures required by state laws.
Resources: 1) NFIB launched a new informational website: APHsNow.com 2) U.S. Department of Laborwww.dol.gov/ebsa/pdf//ahpreport.pdf
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