Semro column: Promise of lower premiums could come at a high price
Here‘s what President Trump said on July 27, 2018. “And to Associated Health Plans. We’re giving Americans the ability – just opened – millions of people going to be signing up – millions and millions. We’re giving Americans the ability to join together to purchase much better and more affordable health care and health insurance.”
To begin with, they’re actually called “Association” Health Plans or AHPs. AHPs allow small employers and individuals to collectively purchase health insurance through an “association.” They can then pool their policy-holders as a group with the hope of reducing administrative expenses like larger group plans. Most AHPs organize around a common profession or industry group, like realtors, car dealers or dairy farmers. The association can hold the policy directly or it can self-insure its members’ medical claims.
AHPs aren‘t new and they’ve had a checkered past. The first version of AHPs were called Multi-Employer Welfare Arrangements, or MEWAs. Since their inception in the mid-1970s, MEWAs were so prone to fraud and abuse that Congress modified the law in the early 1980s to allow more extensive federal and state oversight.
Association Health Plans were introduced in the 1990s. Like MEWAs, many AHPs filed for bankruptcy, citing fraud or insolvency. Between 2000 and 2002, scams left more than 200,000 policy-holders with more than $252 million in unpaid medical bills. Between 2001 and 2003, four long-standing self-insured associations became insolvent, leaving $48 million in unpaid medical claims and 66,000 individuals and small businesses uninsured. Once again, sweeping federal and state reforms were implemented that reduced bankruptcies but made starting up new AHPs less attractive.
The Trump administration has now introduced new federal rules to promote the expansion of AHPs while stripping away many of their previous coverage and legal protections. These new rules (which take effect after September 2018) allow AHPs to be exempt from many of the ACA’s individual market rules, including the requirement to cover minimum essential benefits, as well as underwriting limits and participation in a single risk pool that keep premiums lower for many consumers. In addition, out-of-state AHPs may not be subject to all of the consumer protections in the state where they’re purchased.
Colorado’s Division of Insurance made the following statements when the Administration’s proposal was released:
“The Commissioner found a number of troubling areas regarding the expansion of these types of arrangements, but his overall concern is that they could put Colorado consumers at risk. Such plans have a history of financial instability, especially if they do not have enough state oversight. There is also concern that the federal government’s changes would weaken Colorado’s ability to regulate these plans and protect consumers.”
“As the proposed rule is written, there is a lot of wiggle room for these association health plans to go off the rails in ways that would hurt Coloradans’ wallets and their health coverage.”
“It’s a lose-lose proposition to chase lower premiums that may not materialize.”
Unfortunately, it doesn’t end with fraud and fewer consumer protections. According to the American Academy of Actuaries, since the administration will allow AHPs to operate under different rules than other plans in the individual health insurance market, younger and healthier policy-holders may leave that risk pool. This would further fragment the market, increasing premiums for older and less healthy people.
Actuaries say that it’s very unlikely that AHPs will be able to attract enough policy-holders to negotiate lower provider payment rates like larger insurance companies. As a result, AHPs can only lower premiums by significantly reducing health benefits, charging higher out-of-pocket costs and by attracting younger and healthier policy-holders who file fewer claims.
Even long-standing supporters of AHPs are refusing to implement these plans, albeit for different reasons. The National Federation of Independent Business (NFIB), a group that has supported AHPs for the last 20 years, now refuse to set one up, calling the new Trump administration rules “unworkable.” Similar associations, like the National Association of Realtors, won’t commit to setting up an AHP either.
One has to wonder if “millions and millions” of Americans will be signing up.
Finally, as a follow up to my column in April, the rules for another Trump administration proposal on extending short-duration health insurance plans have now been finalized. These plans don’t cover pre-existing conditions, offer very skimpy benefits, have high out-of-pocket costs and can charge older people much higher premiums. On Aug. 1, the Colorado Division of Insurance released a consumer advisory entitled, “Short term health plans can fall short – not covering pre-existing conditions and the limits on benefits could leave consumers with big medical bills.” Consumers need to read this advisory before even considering one of these plans.
Bottom line, whether we’re taking about AHPs or short-duration plans, the promise of lower premiums may ultimately come at a high price for some consumers and businesses should they actually have to use their health insurance.
Bob Semro of Glenwood Springs is a former health policy analyst for the Bell Policy Center, and a legislative and senior advocate.