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Trump Administration Unveils Association Health Plans Final Rule

Analysis  |  By John Commins  
   June 19, 2018

Supporters say AHPs offer affordable coverage alternatives for small businesses and individuals. Critics call the plans 'junk insurance' with narrow coverage that stick consumers with huge medical bills.

The Trump administration on Tuesday unveiled a final rule that allows small businesses to band together to create association health plans for employees that offer lower-cost coverage, but also provide fewer benefits than mandated under the Affordable Care Act.

Critics argue that AHPs offer coverage that's too limited, but proponents argue the more affordable alternative to ACA-compliant plans will offer much-needed relief to small businesses and individuals who need it.

"Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies," Labor Secretary Alexander Acosta said in a media release.

"AHPs are about more choice, more access, and more coverage. The President's decision helps working Americans—and their families—purchase quality, affordable health coverage," he said.  

The rules will be phased in over the coming months, and some AHPs could launch by September 1.

Consumer Protections

The Trump administration said that antidiscrimination protections that apply to large employer health plans will also apply with the AHPs. That includes prohibitions on cherry picking beneficiaries, charging higher premiums, or denying or canceling coverage based on pre-existing conditions, or if an employee becomes ill.

Those claims were dismissed, however, by critics. Families USA Executive Director Frederick Isasi called the AHPs "junk insurance"

"Because association health plans might appear like regular insurance but typically offer narrow coverage, many consumers who buy them will discover that they have astronomically high medical bills for charges they assumed would be covered by their health insurance," Isasi said.

Families USA and other critics have noted that the AHPs could be designed to keep people with preexisting conditions from buying the policies. That, in turn, would raise health insurance premiums for people buying standard coverage through the individual marketplace.

America's Health Insurance Plans (AHIP), which represents insurers, released a statement saying the final rule does offer some important consumer protections, including for those with preexisting conditions.

"However, we remain concerned that broadly expanding the use of AHPs may lead to higher premiums for consumers who depend on the individual or small group market for their coverage," AHIP said. "Ultimately, the rule could result in fewer insured Americans and may put consumers at greater risk of fraudulent actors entering this market."

Market Impact

The Congressional Budget Office last month estimated that more than 4 million people—mostly healthier, younger, and wealthier—could switch from ACA-backed health plans to cheaper AHPs in the coming months and years.

An analysis by Avalere Health in February projected that AHPs could lead to 3.2 million enrollees shifting out of the ACA's individual and small group markets into AHPs by 2022.

That migration to AHPs would bump up premiums for those remaining in the individual ACA market by 3.5% and increase small group ACA premiums by about .5%, compared to current law, according to Avalere's analysis.

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

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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