What is a health association — & why?

What is a health association — & why?

Updated Jan. 5, 2018: The Trump administration pushed ahead with efforts to expand access to association health plans this week, formally proposing new rules requested via an executive order President Donald Trump signed in October.

The formal rules follow failed attempts by Congress to fully repeal President Barack Obama's signature health care law, though Republicans did manage to overturn its individual mandate as part of its tax bill passed in December.

What are health association plans?

The main plank of the order expands access to association health plans. These plans allow small businesses to group together to buy health insurance. This should allow them to get better terms than they would as individual businesses.

Association plans would not be subject to the same coverage requirements as individual or small group plans offered in ACA exchanges. Because associations can negotiate as large groups and because they won't have to follow those strict requirements, they'll likely cost less. They'll also cover less.

What do the rules do?

The rules expand what groups can form association health plans. They also allow for membership to cross state lines — something Trump has long argued would lower health care costs for Americans.

While health association plans aren't subject to the morestringent Obamacare requirements (they're not required, for instance, to cover the ten essential benefits), the rules do prohibit people being turned away due to pre-existing conditions.

How this affects the individual market

Association plans could pose a threat to the individual and small group insurance markets if they catch on. These plans have been around for a while, but have had to follow the same rules as individual and small group plans on the federal marketplace. The ACA mandates plans in these markets to provide "essential health benefits," a list of services that make up a minimum level of care. The services include hospitalizations and rehabilitation and require coverage for pre-existing conditions.

Without these requirements, association plans could end up costing less and attracting healthier people who don't require as much care. This will leave the individual and small group federal marketplaces with a sicker, more expensive population. Without healthier people to offset those costs, insurers in these marketplaces will have to charge higher premiums or leave the market.

The American Academy of Actuaries warned of the problems association plans pose in a February issue brief. The group said they could make it harder for more expensive, sicker people to get health coverage, especially without strong consumer protection laws.

Trump also wants associations to operate across state lines.

Insurance is regulated state by state. If associations can operate across multiple states, it may not be clear who has regulatory authority over them, which could leave consumers in a lurch and possibly without healthcare if the associations become insolvent, the American Academy of Actuaries said in its brief. The National Association of Insurance Commissioners expressed the same concern in a statement on the order.

Trump tweeted in May that Obamacare was in a "death spiral." Association health plans could fulfill his prophecy.

What's next?

The public now has 60 days to comment on the proposed rules before the Trump administration can formally adopt and implement them. There is some speculation, however, that the rules could face legal challenges.

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