On June 19, 2018, the Department of Labor (DOL) released its final rule on Association Health Plans (AHPs). Largely unchanged from the proposed rule, the final rule expands the conditions that satisfy the commonality interest requirements of an employer and provides some additional new flexibilities for AHPs. The effective date of this rule will be phased, with new AHPs who wish to offer fully insured coverage by September 1st, 2018, existing AHPS who wish to offer self-funded coverage by January 1, 2019, and new AHPs who wish to offer self-funded coverage by April 1, 2019.
The rule expands access to AHPs by loosening the definition of “employer”. Small businesses and individuals will now be allowed to band together by industry and geographically to obtain health care as a large group. While AHPs may still not discriminate by health status, the rule allows plans to adjust prices for factors such as age, gender, and industry. The rule also allows plans to charge up to 30% more for individuals not enrolled in a wellness program, and 20% for tobacco use.
So what does this mean for the individual and small group market?
Under the rule, AHPs cannot restrict enrollment based on health status, however the plans will escape other Affordable Care Act (ACA) requirements, leading to plans with fewer protections than those on the ACA. AHPs for example, are not required to cover essential health benefits, and do not have to adhere to the 3:1 age band requirement. This means plans with lower premiums that may attract younger, healthier individuals to leave the ACA plans, which would in turn weaken the risk pool on the exchange.
DOL notes the U.S. Congressional Budget Office (CBO) predicted 400,000 people who would have been uninsurerd will enrolled in AHPs, and 3.6 million would enroll who previously had other coverage, resulting in an additional 4 million in AHPs.
Other actions will have a bigger effect on the market next year.
Another rule we are waiting on is the changes to short term health plans, which could cause greater damage to the individual market in 2019. Under the direction of President Trump’s executive order, the Department of Health and Human Services (HHS) proposed changes to short term plans that will provide more flexibility for these plans that are not required to comply with ACA consumer protections. The Centers for Medicare & Medicaid Services (CMS) actuary, Paul Spitalnic, recently estimated that 1.4 million people could sign up for the short-term policies in the first year, with enrollment reaching 1.9 million by 2022. Those remaining in Affordable Care Act marketplaces “would be relatively less healthy,” Mr. Spitalnic said, and as a result, the average premiums for those insurance policies would increase.
We are also carefully monitoring developments in the Texas v. U.S. lawsuit. In this suit, plaintiffs argue the individual mandate is unconstitutional because the tax penalty was reduced to $0 by Congress this year, and therefore other parts of the ACA such as pre-existing conditions, and guarantee issue are unconstitutional as well. The Department of Justice recently announced they will not defend the law, and received quick backlash from virtually the entire industry, as well as Democratic and Republican Senators alike. The case presents a very weak argument and is unlikely to ultimately prevail, however we continue to follow developments given its utmost importance and potential to devastate the individual market.
Potential State Mitigation?
We are already seeing several states take steps to prevent further damage to their insurance programs. Several states have introduced proposals to limit short term plans and prevent long lookbacks on pre-existing conditions. California’s legislature is proposing to ban short term plans outright. Other states are looking at reinsurance options. Maine is waiting on approval for its 1332 reinsurance waiver, and announced rates will be about 5% lower in 2019 should the waiver be approved. Minnesota is a great example of success with the reinsurance: the state recently announced rate decreases for 2019 as a result of the program which started in 2017.
Gorman Health Group experts can assist you with operationalizing any new regulations. The Insider is our exclusive intelligence briefing, providing in-depth analyses and expert summaries of the most critical legislative and political activities impacting and shaping your organization and the future of Medicare, Medicaid, and the Health Insurance Marketplace. Want to stay up to date on policy and regulation changes? Contact us today
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