Policy and Regulation News

Idaho’s Expansion of Association Health Plans Risks ACA Market

The Academy of Actuaries warns that Idaho’s decision to expand available association health plans will create destabilizing conditions on the state’s ACA insurance market.

Academy of Actuaries warns about Idaho expansion of AHPs

Source: Thinkstock

By Thomas Beaton

- The Academy of Actuaries warned insurance officials and government leaders in Idaho that the decision to expand the sale of association health plans (AHP) will destabilize ACA individual health plan risk pools and reduce essential health protections.

The Academy penned a direct response to Idaho’s coordinated efforts to expand AHP  availability within insurance consumer markets, following an executive order from President Trump.

Specifically, the Academy believes that offering short-term AHPs would spike premium rates for ACA plans because healthier, low-cost individuals would purchase cheaper plans. This would leave ACA risk pools with only high-cost individuals.

“In particular, our comments highlight conditions needed for a sustainable health insurance market and the potential adverse consequences on the ACA risk pools of permitting state-based plans,” the Academy said.

The Academy presented arguments to stabilize individual markets and limit AHP expansion in two major points, including methods to balance risk pools and reduce individual health plan market fragmentation.

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Idaho needs a large individual health plan risk pool to stabilize premiums, the Academy suggested. Having a higher number of individuals makes it easier for state officials to determine premium rates.

Attracting both unhealthy and health individuals would allow payers to provide fair premium rates to appeal to people who may need comprehensive health benefits either for immediate use or in the future. Offering AHPs could create mass market migration in Idaho’s insurance market and effectively skyrocket individual premium rates for comprehensive benefits.  

“Health insurance markets also require a stable regulatory environment that facilitates fair competition, with health plans competing to enroll the same participants operating under the same rules,” the Academy said.

“If one set of plans operates under rules that are more advantageous to healthy individuals, then those individuals will migrate to those plans; less-healthy individuals will migrate to the plans more advantageous to them.”

The Academy added that leaders in Idaho continue to support federal enrollment and financial support systems to help balance individual risk pools.

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The ACA has risk adjustment provisions including premium subsidies for individuals with low-incomes and enrollment incentives like financial penalties. However, actions from the Trump Administration and Congress have eliminated key ACA elements such as the individual mandate by 2019 and federal cost-sharing reductions.

AHPs may also inhibit the ability of low-income individuals to receive comprehensive health benefits if market fragmentation causes ACA individual plans to become too expensive, the Academy warned Idaho officials.

A bulletin released by the state’s Insurance Commission bulletin allows AHP insurers to provide their plans with much cheaper premiums but without needing to provide essential health benefits to vulnerable beneficiaries. Additionally, AHP insurers can exclude certain individuals from their risk pools and gear risk pools to financially favorable conditions, the Academy suggested.

“State-based plans can also exclude coverage for pre-existing conditions for applicants who don’t provide evidence of previous coverage,” the Academy said. “State-based plans would likely be structured to attract low-cost enrollees, through fewer required benefits, higher cost-sharing, and premiums that vary by health status.”

State-based AHPs would also not adhere to ACA risk adjustment programs and insurer payments would not be adjusted to ACA rates, which could create two separate risk pools where payers would benefit more if they provide AHPs. Ultimately, individuals would have to pay much more to have individual health plans that cover all the essential health benefits under current law.

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“Rather than having a single risk pool, in which costs are spread broadly, there

would be, in effect, two risk pools—one for ACA coverage and one for state-based coverage,” the Academy cautioned. “Premiums for ACA coverage would increase, threatening sustainability of the ACA market and its pre-existing condition protections.”

The Academy explained that stable healthcare policy adherence from insurers and state officials creates an insurance market where people can receive adequate benefits at the appropriate cost.

Creating ACA work-arounds only inhibits the ability of federal and state insurance stakeholders to advance healthcare equity and affordability.

“Improving health insurance choice and competition across a health insurance market requires achieving stability and sustainability and fostering a consistent regulatory environment,” the Academy concluded.

“Although offering state-based plans that can avoid ACA issue, rating, and benefit rules could provide lower-cost health insurance options to many Idaho residents, such options would lead to a deterioration of the state’s ACA market. As a result, ACA premiums would increase, and options for individuals with pre-existing conditions would narrow.”