A proposed rule from the US. Department of Labor (DOL) could lead to a significant increase in the number of members enrolled in Association Health Plans (AHPs) and, in turn, decrease membership and increase premiums for individual and small group markets.
Currently, AHPs are health insurance arrangements sponsored by an industry, trade, or professional association that provide health coverage to their members. These offer an alternative to small businesses and individuals who are part of a larger industry or association. However, due to the current limitations – individual enrollees who are sole proprietors and small employers who are engaged in a specific trade or business – many people are not eligible to participate in AHPs.
The DOL proposed regulation seeks to broaden access by:
- Allowing employers to form a Small Business Health Plan on the basis of geography or industry. A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all businesses in a particular industry nationwide
- Allow sole proprietors to join Small Business Plans, clearing a path to access health insurance for millions of uninsured Americans who are sole proprietors or the family of sole proprietors
However, the impact of the proposed regulation won’t only affect AHPs. A recent analysis from Avalere Health concluded that the AHP changes would impact enrollment and premiums for existing individual and small group markets by shifting healthier-than-average members from those markets into AHPs. This adverse selection would increase individual and small group market premiums and could lead to decreased competition in those markets due to changes in issuer participation.
According to the analysis, the DOL regulation would have the following impacts:
- Higher premiums for individual and small group – Premiums are projected to rise in the current individual (2.7% – 4%) and small group (0.1% to 1.9%) markets, relative to current law. This would be largely due to healthier employees shifting to AHPs
- Increased number of uninsured – An estimated 130k to 140k individuals will become uninsured, mostly due to increasing premiums in the individual market as healthier individuals move to AHPs.
- Additional 2.4M to 4.3M enrolled in AHPs – This represents members switching from the individual market (0.7M to 1.2M) and small group market (1.7M to 3.2M) into the expanded AHPs.
- Lower premiums for AHPs – Premiums in the new AHPs are projected to be between $1,900 to $4,100 lower than the yearly premiums in the small group market and $8,700 to $10,800 lower than the yearly premiums in the individual market by 2022.
The proposed rule follows the recent healthcare industry trend toward increased flexibility. While this may benefit the AHP market, it is likely to have adverse effects on the individual and small group markets.
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