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Washington State - New Association Health Plan Rules for Small Businesses
Sunday, July 08 2018

Back in early 2017, President Trump signed an executive order intending to provide alternatives to the Affordable Care Act (ACA). One of the rules included in this executive order modifies how the government can regulate association health plans (AHPs). 

What are association health plans?
Association health plans allow small groups to band together and act as one large group. AHPs are actually not plans themselves, but rather an overarching term describing small business and sole proprietors coming together to negotiate better prices with health insurance companies.

Essentially, the larger a group, the less risk there is for an insurance company.  If the group is determined to be less risky, the price is lower. So, by allowing several small groups to act as one large one, the risk (potential cost for the insurance company) gets spread out amongst the large pool of enrollees, and when one person gets sick, there are more than enough monthly payments going to the insurance company to cover those costs.

This concept isn't really new, so what is changing about association health plans?
The big change with these plans is that they will now be regulated the same as large employer policies. Most importantly, this means that association health plans (AHPs) do not need to adhere to ACA rules, such as the requirement to offer plans with the ten essential benefits.

According to Labor Secretary Alexander Acosta, “AHPs are about more choice, more access, and more coverage.” These plans will probably benefit enrollees by having lower premiums, and might even mean the difference between offering coverage or not for some small employers who struggle to afford Obamacare prices. The devil will be in the details.

At what cost does access to more choice and cheaper premiums come at?
Although being part of a larger group does often come with price reduction due to a larger risk pool, there are more reasons why these plans will likely be a lot cheaper.

As stated before, these plans do not have to offer the ten essential benefits. If you’re a young woman looking for maternity benefits, or someone with a chronic illness, you might not be getting everything you need by getting coverage from an association health plan.

Also differing from ACA policy—gender, age, and industry could affect prices of individuals being covered under association health plans. Health status is not included in this list though, so just as with the ACA, pre-existing conditions will not affect prices for those covered under association health plans.

How does the new regulation on association health plans affect the ACA as a whole?
A major selling point of the ACA was that all people would be treated the same, and there was a baseline of benefits that had to be offered.

With the new rules regarding association health plans, this facet of the health insurance industry would no longer be true for small businesses participating in the AHPs.

AHPs could also make our Washington State Health Insurance exchange (Obamacare) more volatile. In theory, young healthy workers could all choose to be covered by the less comprehensive, but cheaper AHP plans. This could leave older and sicker Americans as the only enrollees in Obamacare plans, which could mean prices skyrocket, since the insurance companies are only covering sicker individuals. The death spiral.

We should all remain skeptical until more details and bonfide products are released.

Should you have any questions, please contact me.  Wendee Allen, PNW Insurance Solutions  

This is article is for general information and may not be updated after publication.

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