- The Department of Labor (DOL) has issued a final rule that expands consumer availability of association health plans (AHPs) starting on September 1, 2018.
The rule comes months after President Trump and the DOL proposed executive changes that allow consumers, employer groups, and contractors to sponsor AHPs, which may be more affordable but offer fewer consumer protections than plans compliant with the Affordable Care Act.
AHPs are not required to provide the essential health benefits (EHBs) package included in the ACA. The plans have been intended to provide less expensive options for small businesses, regional collectives, and industry groups that may not be able to purchase insurance through the public exchanges.
Secretary of Labor Alexander Acosta believes the final rule will allow more families and employee groups to purchase affordable health plans and avoid rising costs in the individual market.
"President Donald J. Trump is expanding affordable health coverage options for America's small businesses and their employees. Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies," Acosta said.
"AHPs are about more choice, more access, and more coverage. The President's decision helps working Americans – and their families – purchase quality, affordable health coverage."
Acosta said that the final rule implements corporate safeguards and monitoring procedures to enforce anti-discrimination protections for AHP enrollees. The DOL will share AHP authority and oversight with state governments.
Under the rule, only a “bona fide group or association” can create an AHP. The rule prohibits payers from developing AHP offerings. Providers and related healthcare professionals would also be prohibited from establishing an AHP as a bona fide group.
However, the rule does allow payers and related organizations to consult or help develop AHPs by providing claims administration, formulary guidance, and provider network design.
“Several commenters [on the proposed rule] supported this requirement as important to differentiate bona fide employer groups from commercial entities selling insurance to employers,” DOL said. “Others asked the Department to strengthen this prohibition further by including other entities with similar conflicts of interest, such as healthcare systems and network providers.”
AHPs can also only be formed if there is a “commonality of interest” among individuals looking to form a group.
A commonality would include individuals who have similar geographical locations and professions, for example. AHPs can not discriminate enrollment against individuals if they meet commonality requirements.
In a DOL example, if an association offers benefits to restaurant employees in a specific area, then it cannot exclude the employees of a certain restaurant if the business’s employees have higher-than-expected care costs.
DOL also stated that an individual’s health conditions and their part- or full-time employment status cannot be used to discriminate against plan members. States will have discretion around limiting AHP enrollment in relation to other non-health factors.
“States maintain significant authority to impose additional rating rules on insured AHPs through regulation of the underlying insurance policies obtained by AHPs to fund the benefits they provide, and may also impose similar requirements for self-insured AHPs,” DOL said.
The final rule effectively allows AHPs to be separate from the ACA health exchanges and operate as an independent market. DOL said removing AHPs from the ACA market will allow the plans to scale and provide affordable benefits.
“AHPs’ flexibility to offer products and premiums that more closely align with their members’ preferences is a significant benefit for those members,” DOL said.
“That flexibility also frees AHPs from some regulatory overhead, and may enable some AHPs to achieve the scale necessary for administrative efficiency and market power. States retain discretion to regulate AHPs. For these reasons, this final rule does not subject AHPs to the ACA’s individual and small group market rules.”
Expansion of AHPs could lead to mass migration by consumers from the individual health plan market to the AHP market. The DOL and the Congressional Budget Office estimate that nearly 400,000 individuals will seek to enroll in newly expanded AHPs.
Ross Weiler, a Principal consultant at Day Health Strategies, warned that AHPs will create skyrocketing premiums in the ACA plan market as risk pools destabilize and healthier individuals migrate to AHPs.
“AHPs could create destabilization within the regulated markets over time, and regulated markets could become insurers of last resort,” Weiler said. “The regulated market would only enroll individuals that are the unhealthiest or least attractive risks, which would be problematic.”
Industry groups including AHIP, BCBS, and the Academy of Actuaries expressed similar concerns, saying that AHP expansion would lead to higher, unstable premiums for both payers and consumers.