Association Health Plans Face Uncertainty in 2020

In 2018 the Trump administration updated how association health plans are regulated as a way to increase choice and lower costs. More recently, democratic-controlled states are threatening to ban them while the courts decide their ultimate fate. Our experts analyze how events might play out.

Association health plans (AHPs) may not be available in a number of states in 2020 as the courts are in the process of deciding a dispute between the federal government and attorneys general in 12 states under democratic control. The federal government is proposing to expand access to AHPs, while states are challenging the validity of the proposed rule. Because the ruling will not be finalized until after the new year, states are free to proceed as they see fit. However, if the 12 states decide to ban AHP—because they undercut the ACA and increase the potential for so-called junk insurance plans—about 30,000 American could lose their AHP. 

This decision is reminiscent of the battle on Medicaid expansion after the ACA was passed. A number of republican-controlled states have elected to not expand Medicaid. Democrats are now threatening to do the same with AHPs. While some perceive the battle to be partisan, Democrats insist they are operating in the best interest of health consumers. The expressed concern is that AHPs would bring about negative selection, as healthy individuals opt for the cheaper coverage. This would theoretically leave a higher percentage of more sick or higher cost individuals in the ACA plans. 

However, according to a recent article in The Washington Post, anecdotal evidence suggests that AHPs are providing lower premium options, allowing members to save as much as 60%. Proponents insist that the ACA will not be left with a sicker pool of covered members, since AHPs address only a narrow slice of the market. Thus, the impact would be minimal. 

First Report Managed Care has been keeping tabs on potential effects of AHP-related legislation, turning to a panel of experts to analyze key issues and predict likely outcomes (see “The Return of Association Health Plans, February 2018; and “Revisiting Association Health Plans, March 2019). We return to our experts to weigh in on the latest. 

Our panelists include: 

• Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
• Gary Owens, MD, president of Gary Owens Associates, Ocean View, DE
• Arthur Shinn, PharmD, president of Managed Pharmacy Consultants, in Lake Worth, FL
• Norm Smith, principle payer market research consultant, Philadelphia, PA
• F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC

The democrats’ move to ban AHPS in some states appears to be similar to what republican-controlled states did to block the ACA’s Medicaid expansion in their states. Do you see it that way?

Dr Owens: I agree that it is a political football being tossed around by opposing sides of the aisle. Democrats take the position that these plans violate the consumer protection provisions of Obamacare for small groups and bypass minimum benefit packages. Republicans argue that these plans have been historically successful and that when well-managed, they can offer choice to small employers at affordable prices. The reality probably lies somewhere in the middle. Meanwhile AHPs are being kicked around by both sides to prove their respective points, either defending or dismantling Obamacare.

Dr Vogenberg: Both parties—democrats with AHPs and republicans with Medicaid expansion—appear to be employing a means to an end approach. Each party is applying different logic regarding the consequences of their actions. They each believe what they are doing is in the interest of their ideals. 

Dr Hsu: The threatened ban by democrats is definitely political. They are sensitive and vigilant to any action by the current administration to dismantle the ACA. So they do not favor any change that will not maintain the status quo or expand Obamacare.

Mr Smith: AHPs will never cover enough for the democrats, hence their opposition to them. Even though AHPs may have value, I do not think they will ever get support from the left. 

Do you think there is practical merit to the argument? Does allowing AHPs introduce the prospect of so-called junk plans that can ultimately serve no benefit or even cause harm? 

Dr Owens: To me, it is mostly about a power struggle between the two parties. Sure, there are AHPs that can be considered true junk plans. Those need to be out of business. However, some of these plans have been well-run and have given consumers a lower cost option by trading off some benefits for insurability. So the move to ban them all can only been seen as politically motivated. 

Dr Hsu: The reason I believe it is primarily politically motivated is that the democrats are concerned about preventing people from securing benefits under the ACA, which they helped get passed. With this in mind, they will not support and will actively block any changes and/or additions that undermine Obamacare. 

Dr Vogenberg: Junk plans is a political term applied to an insurance plan that is not in line with a certain political mindset or a select philosophy. Who is to say the value of AHPs is junk—businesses, politicians, or consumers? The answer lies in who is paying for coverage. This is no different than with a robust coverage plan that is not deemed junk. Keep in mind that AHPs are not new, but they now fall under a new definition that allows for their expanded use. Since value is in the eye of the beholder, in this case business, of course value is seen in AHPs.

Dr Shinn:  I agree that not allowing AHPs in all states amounts to a political move motivated by a fear that the ACA is threatened. 

Those who favor AHPs have likened them to employer-sponsored plans. For that reason, they argue, these plans should be readily available to those who need them. Evidence suggests AHPs can lower premiums.  As was noted in a recent article in The Washington Post, members of the Nevada Association of Realtors were paying up to $4,000 a month for coverage on the ACA exchange, but are now paying less through an AHP. 

Dr Owens: I think they should remain available for that very reason.  However, the big issue is that the fate of these plans is being held up in the appellate courts. Their ultimate fate may be decided too late for the next round of enrollment, meaning it is possible they will be banned in certain states in 2020. 

Dr Shinn: Of course, they should remain available. They present another option—consumers should have the choice of joining them if other options are not available or are more costly. 

Dr Vogenberg: I agree they should continue to be available. AHPs are a form of employer-sponsored plans since they create a pool that assumes the risk for the health of their members. Employers once offered similar plans, known as mini-medical or mini-med plans, due to the fact that they offer limited coverage. Today’s AHPs share some same features and limited coverage. 

Even the plans on the ACA exchange offer different levels of coverage. The so-called traditional plans and gold or platinum coverage plans now routinely come with significant deductibles (as high-deductible plans) in addition to copayments and/or coinsurance costs and other out-of-pocket payments paid by covered employees. In addition, formulary or provider access restrictions that are common in those “better” plans end up acting like the mini-medical plans to a number of businesses and patients. 

Do you see this having an impact on the 2020 presidential race? Health care is a big campaign issue, but what about AHPs specifically? 

Dr Owens: This will not be a general election issue, nor a big issue in the primaries.  While it is important for both parties, the average American is not interested in the AHPs. In fact, if they don’t belong to one, most Americans probably have no clue what an AHP is.

Dr Vogenberg: Given where the Democratic candidates started in the campaign and where they are currently, it’s not likely this will be an issue during the primaries. Democrats are arguing the value of single-payer vs the public option. And I agree with Dr Owens, most do not know what AHPs are, so it won’t be a point of debate during the general election either. 

Are there any other important points you wish to make about AHPs? 

Dr Vogenberg: Despite all the rhetoric and pontification in the news, we are left with addressing the question of what is value from the perspective of who is paying and for what. Until our society comes to grips with answering such fundamental questions on health insurance coverage, we will continue to see [political] parties bicker, propose ineffective or ill-conceived legislation, and kick the financial can down the road in the same way we see with Medicare and veteran health care.

Mr Smith: If these products remain on the market, I think it is perfectly reasonable to ask for more transparency. Who are the companies selling these products? Who reviews their materials? I’d be surprised if these organizations are being monitored as closely as traditional health plans are.