The Affordable Care Act set out to make health insurance more available for consumers. In doing so, it ended up driving the prices for employers higher. Many individuals and small businesses found the requirements of the ACA crippling and costly.
Large corporations actually pay less for health coverage because they spread out their risk and overhead cost among a large pool of people. For a small business, covering all of the requirements set forward by the ACA for standard benefits and out-of-pocket costs is taking away from their profits. Association Health Plans might be the answer to alleviating the healthcare burden for small businesses.
What is an Association Health Plan?
On October 12, President Trump signed an executive order directing the Department of Labor to figure out how to bend the rules of Obamacare so that small businesses can buy group coverage at a lower price. The solution came in a proposed regulation from the Department of Labor on January 4th, 2018.
The strategy allows small businesses to band together and purchase healthcare as a larger group. By increasing their numbers, groups of small companies are seen more like a large corporation, thereby decreasing their healthcare costs. These new group policies are exempt from many ACA requirements, providing a lower cost/lower benefit alternatives. These group policies are known as Association Health Plans.
In July, the final ruling was issued stating all the details of Association Health Plans (AHP) and how they are designed to work. The rule actually encourages small businesses to set up more AHPs around the country. Small business can form AHPs for the primary purpose of providing health insurance, and can be based not only on a common industry, profession, or trade, but also on a geographic area. Membership is open to both self-employed individuals without any employees and small businesses. Under this new option, a Congressional Budget Office analysis estimates that 4 million more people will sign up for AHPs
AHP vs. ACA
Under the ACA (Affordable Care Act), insurance companies are required to follow governmental regulations. These regulations includes covering all 10 categories of essential health benefits, providing coverage for all pre-existing conditions, etc.
An AHP does not carry the same requirements. They cannot deny membership, charge more, or offer fewer benefits to a member based on any health factor. But they can consider factors including gender, age, geography, or industry when setting costs.
AHPs also have more flexibility to offer lower cost and lower benefit programs for healthy individuals who don’t want to pay a lot for healthcare benefits they don’t use/need, but are required to have under ACA.
What does this mean for employers?
For employers, this is good news. Now you can band together with other small businesses without having to shoulder the burden of healthcare on your own. An AHP works like a typical insurance plan, with a similar network of doctors but all AHPs are different. For example, some plans will offer skimpy coverage for prescription drugs, but better coverage for annual checkups.
Because they have more flexibility in price, they also have more flexibility in coverage. AHPs are designed and priced for the needs of the group. For example, a group of cab drivers in Los Angeles would have a different plan with a different cost than school teachers in Nebraska.
While AHPs count as “minimum essential coverage” as required by Obamacare, they aren’t subject to other ACA regulations, which can make them less expensive overall.
This new option gives small businesses the opportunity to provide better benefits to their employees at a lower cost. It’s worth considering your options and deciding what is best for your employees and your company.