What is an Association Health Plan?
Association Health Plans were designed decades ago to help small businesses secure health insurance for their employees. By bringing together a larger pool of people to negotiate premiums and buy insurance, small businesses were looking to recreate what large corporations do to provide their employees with competitive employee benefits. In the early 1990s, many AHP plans filed for bankruptcy due to funding issues, and consequently the government made changes that almost drove AHPs out of the market completely.
Recently, the Department of Labor began looking into expanding the use of Association Health Plans to help small businesses reduce rising health care expenses and enjoy similar benefits as large corporations do today under the Affordable Care Act (ACA) regulations. As more small businesses struggle to maintain health coverage for their employees, Association Health Plans might be the key to lowering costs for this sector of the market.
Current regulations for Association Health Plans state that employers participating in an AHP must have a “commonality” (like the Association of Electricians), must reside in the same state, and must abide by the individual state insurance regulations. The association can be a professional or trade organization, but the health insurance must be an additional member benefit, not the sole purpose of the association (like AARP). Association Health Plans must also operate under the laws of the ACA, protecting pre-existing conditions as well as any state rules and standards. This has been very limiting for AHPs, as they have not had negotiating power with insurance companies since the ACA was enacted in 2010.
The renewed interest in Association Health Plans is due to the impact the ACA has had on small business. Current state regulations have made AHPs difficult to operate and without the advantages of large corporate health plans. Association Health Plans could give small businesses more choices and lower premiums.
The proposed legislation by the Department of Labor expands the definition of “employer” and will potentially allow small businesses to join together and purchase health insurance with more options. These changes could help Association Health Plans sell across state lines, be more competitive, and offer more choices to small business owners to lower health care costs.