Expanding Association Health Plans Would Hurt ACA Markets, Analysis Finds

A proposed rule by the Trump administration to allow association health plans (AHPs) to sell insurance across state lines would shift 3.2 million enrollees out of the Affordable Care Act (ACA)'s individual and small group markets by 2022 and increase premiums, according to a new analysis from Avalere.

The proposed rule would increase premiums for those remaining in the individual ACA market by 3.5% and increase small group ACA premiums by approximately 0.5% compared with current law, as the association plans will siphon healthier enrollees away from ACA plans, the analysis released Wednesday found.

Last October, President Trump signed an executive order to follow through on his campaign promise to allow insurance sales across state lines, which he said would give consumers more choices and drive down premiums. The move is opposed by the National Association of Insurance Commissioners (NAIC) and the American Academy of Actuaries.

The plans would be exempt from ACA regulations, including those guaranteeing 10 essential health benefits and prohibiting insurers from using preexisting conditions as a reason not to offer benefits. The AHPs will increase choices and lower premium costs, as the administration promised, but for less coverage and more risk, while making the ACA markets more expensive, the analysis found.

The Avalere forecast projects 3 different modeling scenarios, which it called low, moderate, and high, based on risk. The full impact of the premium increase could range from 2.7% on the low end to 4% on the high end in the individual market, and from 0.1% to 1.9%, respectively, in the small group market. The premium increase would also bump up the number of uninsured Americans by 130,000 to 140,000 additional individuals in 5 years, according to the analysis.

Those who choose AHPs will find lower premiums for less generous coverage. Premiums in the new AHPs are projected to be lower by approximately $2900 a year compared with the small group market and $9700 a year compared with the individual market. These differences are largely attributable to less generous benefit offerings and healthier enrollees due to risk selection, Avalere said.

“Consumers are always looking for a new low-cost health insurance option,” Dan Mendelson, president of Avalere, said in a statement, “but migration of healthy people to a new product will ultimately take a toll on what is presently being sold in the market.”

AHPs are health insurance arrangements sponsored by an industry, trade, or professional association that provide health coverage to their members—typically small businesses and their employees. The report said that for those who choose AHPs, there will be some positives besides the lower premiums. Benefits might be more flexible or tailored to meet the needs of those who are enrolled.

On the other hand, there will be high out-of-pocket costs for those who wind up having significant healthcare expenditures, and there is the possibility of potentially discriminatory insurance practices or that new AHPs may be unprepared to effectively manage risk for their enrollees.

Meanwhile, in a blog post about this issue in The National Law Review, a Massachusetts attorney who represented the Romney administration during the implementation of that state’s healthcare reform act wrote on Thursday that the issue of setting AHPs free from the regulations of the ACA will not be so simple.

Alden J. Bianchini said that the president’s executive order directing the Departments of Treasury, Labor, and HHS to craft regulations allowing the sale of group health insurance may not be possible under current laws, including the Employee Retirement Income Security Act (ERISA), as well as state laws regulating insurance.

“The promise of a uniform regulatory regime that allows for uniform plan design free from state regulation is not something that the Department of Labor—or any other Federal agency—has the power to enable,” Bianchini wrote. “This is a matter for Congress, which has the power to fully preempt state laws regulating insurance but chose not to in ERISA. Any attempt by Congress to expand the scope of ERISA preemption to the regulation of health insurance would face stiff resistance from state regulators and the NAIC, among others. It would also represent a major shift in the federal/state balance of power, upending more than 70 years of precedent.”

The Avalere analysis is the second report in a week that finds premiums would rise in ACA plans and more Americans would be uninsured as a result of proposed insurance changes from the administration. The Urban Institute, a liberal think tank, examined state-by-state the combined effects of eliminating the individual mandate penalties and expanding the use of short-term limited-duration insurance plans that are not compliant with the ACA. Those 2 changes will increase premiums by 18.2%, on average, in 2019 in the 43 states that do not prohibit or limit short-term plans, it found.