What is a health association — & why?

What is a health association — & why?

President Donald Trump finally did a healthcare thing Thursday after months of being stymied by a bickering Congress. He has tried since his inauguration to replace the Affordable Care Act, which he says reduces choice and increases costs in the individual insurance market. Since Congress has thus far failed to replace the health law, Trump acted on his own with an executive order.

The main plank of the order expands access to association health plans. These 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.

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?

Trump's signature isn't enough to change healthcare rules right away. Acosta has 60 days to come up with regulations that will allow more employers to form these plans. The new rules should allow associations to form based on common industry or geography.

Any regulations he comes up with will also be subject to public comment. The drawn-out process means any new rules should have minimal impact on signups for 2018 ACA plans. The federal open enrollment period starts Nov. 1.

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