Association Health Plans A Disastrous Scheme for Small Business
Issue: Association Health Plans (AHPs) are health insurance arrangements sold by associations. AHPs are currently regulated by the states, just like all other insurance. Legislation (H.R. 525) has been introduced in the U.S. House of Representatives that would exempt AHPs from state law and oversight. Similar legislation is expected to be introduced in the Senate.
Position: Blue Cross and Blue Shield Plans are committed to making coverage more affordable and expanding access to health insurance. However, AHP legislation would result in higher premiums, more uninsured, and increased potential for fraud and abuse. BCBSA is joined by state officials (governors, state legislators, attorneys general, etc.) and a coalition of 1,300 groups, including consumers, small businesses and healthcare providers, in opposing AHP legislation because it would:
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Hurt, not help, small employers and their workers; and
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Take away key health protections that millions of Americans have today.
Legislation exempting AHP insurers from state laws and oversight would:
Hurt, not help, small employers and their workers.
and their families (23 million people) would face rate increases.
Take away key health protections that millions of Americans have today.
States have enacted laws to ensure that the health insurance plans offered to small employers and their families are fairly priced and pay timely and dependably. Small employers who join these AHP insurers would lose these important safeguards. The result of this legislation would be:
• Skyrocketing Insurance Premiums. AHP insurers would be exempt from state rules that limit how much and how often premiums can be increased. Out-of-state AHPs could offer low "teaser" rates to a healthy group and then immediately increase the premium if someone gets sick
– forcing the employer to drop coverage. In addition, these AHPs would be exempt from state rules that limit premiums for new groups with sick employees – effectively excluding them from coverage. Creating one set of minimal rules for AHPs, while leaving the traditional state market with comprehensive rules, would make it impossible to offer affordable coverage to older and sicker groups. Small employers could opt for AHPs when healthy and then jump back to state-regulated coverage when workers become ill to obtain lower rates and more comprehensive coverage. The result would be "healthy" groups in AHPs and "older, sicker" groups left with skyrocketing premiums in the state market.
• Loss of the right to an independent, external review of a denied claim. In almost all states, consumers can demand an independent external review of a claim denial by an insurer. Employers and individuals joining AHP insurers would lose this right.
• Exposure to widespread fraud and unpaid medical claims. AHPs have been tried and failed. Congress granted multiple employer welfare arrangements (MEWAs) similar exemptions from state oversight in the 1970s, but was forced to repeal this exemption due to the massive fraud and abuse problems that resulted. AHPs are virtually identical to these failed MEWAs. Consumers in AHPs would rely on the U.S. Department of Labor for oversight, which has testified that it could review each health plan only once every 300 years.
According to a letter signed by 42 State Attorneys General: "Consumers rightfully expect their states to protect them from fraud and abuse. Elimination of the state role and replacement with weak federal oversight is a bad deal for small businesses and for consumers."
Special exemption for AHPs would result in the loss of state-required benefits. Individual states have enacted laws that require insurance companies to cover certain medical procedures and treatments.
Federal AHPs would be exempt from covering these benefits, including:
BCBSA Recommendation: BCBSA believes that both the government and the private sector can make healthcare coverage more affordable for small employers by:
