What is a health association?

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a senior reporter and certified personal finance counselor at Policygenius, where he covers insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Updated Sept. 16, 2019: The Trump administration has pushed ahead with efforts to expand access to association health plans, but has so far been stymied by the courts. In March, a district court judge ruled major parts of the administration's newly developed rules expanding association health plans were unlawful. The Department of Labor is now tasked with reworking those rules.

What are health association plans?

Association health 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 more stringent Obamacare requirements (they're not required, for instance, to cover the same 10 essential health benefits as traditional health insurance plans), 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.

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