The History of Association Plans – Part 1
Association Plans were created to help small employers and businesses find cost-effective health care plans and aggregate smaller groups into one larger cohesive unit. Association plans have evolved and grown more sophisticated over the last 50 years, and as healthcare reform continues, so will the evolution of Association plans.
As Association plans were developing, there was trial and error when it came to benefits. The groups had something in common, so the insurance wasn’t the only benefit holding them together, but the spread of risk was not often equal, since some trade groups had larger risk than others due to different loss ratios based on industry.
Larger broad-based trade groups and Chambers of Commerce were a better spread of risk for insurance companies, and they could balance between older and younger individuals to balance the risk. Larger chambers enjoyed simple, one-rate plans with several options to choose from for many years. As insurance underwriting became more complex and sophisticated, plans were having annual increases and losing younger groups.
Since association plans had a tier rating system with no underwriting and no health questions, they became very popular for individuals and groups, but as the Affordable Care Act (ACA) was developed, association plans were evolving once again. Overall, the ACA changed the character of association plans and made the negotiating power of associations the same as all other insurance plans. There was no longer anything special about association plans, other than the plans that were grandfathered by the ACA.
As healthcare reform continues, the role of Association plans will continue to evolve to meet the needs of associations and their members, negotiate the most cost-effective rates, and help associations retain membership and generate revenue.