Are association health plans a good idea?
A topic often discussed in the healthcare debate is association health plans. Proponents believe that small businesses with a common thread should be able to join together to purchase healthcare in the same way larger employers do, negotiating component costs with bargaining clout of the combined employee lives.
Recently, the Small Business Health Fairness Act of 2017 (H.R. 1101), sponsored by Rep. Sam Johnson (R-Texas), cleared the House and has been referred to the Senate Committee on Health, Education, Labor & Pensions.
Central to this legislation is defining an eligible “association.” Under the bill, H.R. 1101 would apply to bona fide trade, industry or professional associations, or chambers of commerce that are permanent member-supported entities and do not condition membership or coverage on health status.
These association plans, which would have to be certified by a federal agency, could be fully-insured — or, if they have 1,000 or more participants, would have the option of self-insurance. The plans would have the ability to sell to members across state lines and avoid many of the benefit mandates which are required of insured plans regulated by the states.
I am not an advocate of association plans, for a few reasons. First, it creates additional bureaucracy in determining the eligible association and, as I have witnessed over my career, this is very much subject to abuse.
More importantly, allowing some groups to avoid state healthcare mandates while others are subject to provide onerous required coverage creates artificial market segmentation and additional risk selection.
Additionally, it would be substituting one administrative bureaucracy for another. The expense of insurance carriers would be replaced by the association administrative costs.
The mandates of state-regulated plans, and finding a way for one group to avoid them, are putting a Band-Aid on a problem. At the same time, it shifts the cost of complying with mandates to a smaller group of policyholders. Incidentally, I view AHPs as similar to professional employer organizations, since both create artificial market segmentation.
So, while association healthcare sounds like a reasonable suggestion, I don’t think it helps the overall cost of care. Healthcare reform must focus on just that: reducing the cost of care, and not just shifting costs from one group to another.