By Joey Costa
A new rule from the U.S. Department of Labor will allow more small employers and self-employed individuals to join forces to create Association Health Plans, providing consumers more choice and even some control over their insurance.
According to U.S. Secretary of Labor Alexander Acosta, the rule will help “level the playing field” for small businesses, allowing these associations to use economies of scale to lower the cost of insurance.
Under the current Affordable Care Act (ACA) regulations, small employers and individuals purchasing coverage have no bargaining power, leaving them with what the insurance companies offer. Consumers have no voice into what their plan covers, and ACA regulations prohibit pricing advantages to groups of consumers.
The new rule enables small employers to join forces to purchase coverage through an AHP, even joining with small employers from other states. It’s basic economics: Increased purchasing size adds leverage and strength to negotiations, and that’s what AHPs are designed to do.
For self-employed individuals, options will be dramatically better. In most situations, self-employed individuals will actually have options. Today, just 14 of Georgia’s 159 counties have more than one insurance company providing plans on healthcare.gov, the federally run health care marketplace. These plans typically are the lowest benefit plans that the insurance companies are allowed to provide under ACA regulations; carriers simply want to keep costs as low as possible.
Through an AHP, small employers and self-employed individuals across multiple states have the opportunity to unite, drive down prices and create new health insurance options.
Will ACA-required coverage for “Essential Health Benefits” be removed? Perhaps. The rule does not force AHPs to cover all these benefits. As noted in the Federal Register, “The ability to design AHP benefit packages and set cost-sharing requirements without the burden of certain federal restrictions is critical to enabling AHPs to provide an additional, more affordable coverage option to small businesses and working owners who may otherwise have been unable or unwilling to obtain higher-priced coverage.”
On the other hand, AHPs must provide state-mandated benefits and abide by other federal mandates, most of which pre-date the ACA. The Labor Department also requires that:
- ALL pre-existing conditions be covered
- No one be denied coverage and
- No one required to pay more due to their medical conditions.
In addition, states will share in the enforcement authority over AHPs that operate in their state. For Georgians, this is added security. The Georgia Department of Insurance has long been a leader in encouraging responsible competition among insurance companies, easily surpassing several states neighboring Georgia that are limited to one dominant insurance company.
Some critics predict AHPs will be “skinny” or “limited” plans. This simply is not accurate. Before the ACA, health plans were quite comprehensive. The main complaint was that coverage was too expensive. The ACA added to this cost by changing how plans are priced and mandating many seldom-used benefits that drive up cost. For example, the ACA requires every policy to include Dependent Dental and Vision coverage for dependent children and even those without dependents must pay for this coverage.
AHPs will be allowed to better meet the demand of their membership. Associations exist to serve their members by providing a variety of industry or regional specific services, and many strong associations will look to AHPs to extend their services and meet the needs of their members.
Any concern that associations will provide “low level” coverage is overrated; in fact, a prudent association would increase benefits important to members. AHPs are designed to be a natural extension of the association, providing coverage that meets the needs of members. Ultimately, no opportunity should be passed up to facilitate consumer-driven, affordable health insurance reaching more Americans.
Joey Costa, Principal Consultant for Joe Costa & Associates Inc., an independent insurance firm serving employers and associations, wrote this commentary for the Georgia Public Policy Foundation.