How Payers Can Succeed in Association Health Plan Markets

April 16, 2018 - Association health plans (AHPs) may completely alter the nation’s health insurance markets with increasing support from federal entities and a handful of state insurance commissions.

An expansion of the AHP market may materialize based on recent decisions made by federal leaders. President Trump issued an executive order at the end of 2017 that allows groups of people to enroll in AHPs without essential health benefits. CMS Administrator Seema Verma followed Trump’s order with a proposed rule to extend the length of short-term health plan and AHP enrollment.

The risks of AHPs on the individual and small group markets sparked caution from health plan experts and payer organizations, who believe that an expanded AHP market would cripple regulated health plan markets and create disparities in healthcare access.

Ross Weiler, principal at Day Health Strategies, concurs with other health plan experts and believes the new market would drastically affect health plan affordability within the regulated markets. Weiler added that payers participating in ACA-compliant health markets may experience harsh financial losses.

“As AHPs grow the ACA-compliant risk pools which currently cover about 12 million people, would worsen,” Weiler told HealthPayerIntelligence.com. “That would lead to higher premiums in the regulated markets, and perhaps fewer plan options, especially for individuals and small employers on the regulated side. AHP growth may also lead to a death spiral within the regulated market.”

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Weiler stated that if AHP sales are expanded at the state or federal level, then health plans should expect to feel immediate and longer-term impacts of expansion.

Payers in the regulated markets would likely raise premiums immediately as new policies are introduced, Weiler contended, because payers could not estimate the financial impacts immediately.

The longer-term effects of an AHP expansion would include the destabilization of individual and small group risk pools as mass-market migration grows from the regulated markets into the AHP market.

“As an unlevel playing field starts to really take effect [between the AHP and ACA-compliant market], and the risk in the insurer’s risk pool becomes worse than the premiums they've been charging, payers will need to raise rates.  These rate increases could be dramatic and unsustainable,” Weiler said.

Individual and small group health plans would likely experience financial impacts and even decline in availability. Expected losses may lead payers to exit the regulated markets.

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Weiler maintained that payers with little or limited market share in the ACA-compliant health plan market would benefit more by selling AHPs. He added that payers with significant market share in the individual and ACA-compliant health plan space would likely continue to participate, but for how long and at what price is unclear.

“Payers who currently participate in the regulated markets and then enter into the AHP market would be in a position where they’d be competing against themselves,” Weiler said. “This is challenging and potentially troubling for payers.”

Weiler explained payers need a value-based approach to healthcare could achieve better financial results in the regulated markets. He suggested that payers in the regulated markets would be wise to expand relationships with providers and establish value-based contracts.

“Payers could add value through high-performing, tiered networks or perhaps through more robust clinical programs and a combination of value-added services to members,” Weiler said.

Health plans should expand their use of predictive analytics, Weiler asserted. Predictive analytics technology may allow payers to determine their high-risk beneficiary groups and focus on creating significantly valuable healthcare experiences for those members.

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“Payers would benefit by developing, implementing and effectively deploying programs to engage chronic or high-risk members to manage their health earlier before a disease or an illness occurs,” Weiler added.

Determining high-risk populations and incorporating population-based analytics is actionable if payers leverage clinical and demographic information within claims data. Weiler stressed that leveraging claims information in an effective manner requires collaborative efforts between payers and their network providers.

Health plans could use claims information to identify high-risk beneficiaries and help providers target clinical interventions based on chronic condition indicators. Ultimately, Weiler argued that data sharing between payers and providers would allow each organization to deliver specialized and valuable care to health plan members.

“If a payer is better at one type of health management program, and a provider is better at another type of health management, then it would make sense to give each group needed data to execute these programs effectively,” Weiler explained.

However, Weiler provided a grim warning suggesting that individual and ACA-compliant markets would not be able to completely avoid market destabilization. Policymakers at both the state and federal level could inconsequently create significant health equity challenges by expanding AHP sales.

“AHPs could create destabilization within the regulated markets over time, and regulated markets could become insurers of last resort,” Weiler cautioned. “The regulated market would only enroll individuals that are the unhealthiest or least attractive risks, which would be problematic.”

“My hope is if AHPs become the law of the land, that policymakers will do so in a thoughtful manner,” he concluded.

“It might be wishful thinking but that would be my hope.”