Could Association Health Plans Be 2018’s Killer App?
Here are five reasons why the proposed rule could be a game changer.
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The spreadsheet. The word processor. Microsoft Outlook. Google Maps. iTunes. These are just a few killer apps - technologies that literally changed the way people do things and improved the world. They're the applications that solved problems, created wealth and continue to make life better for millions. Now, we potentially have another killer app coming in 2018.
OK, actually it's not an app. It's more of a rule. But, depending on how things shakeout, it could have a similar impact for countless small and medium sized companies and the millions of people they employ. It's Association Health Plans. Are you ready for this change?
The rule was announced on January 4th this year by the Department of Labor. It would have a significant impact on the way plans offered by "associations" would be regulated. Of course, it’s part of the Trump Administration's plan to dismantle the Affordable Care Act. But that’s no concern of yours. Your job, as a business leader, is to put politics aside and look at the facts so you can determine how potential rules like this would affect your business and what actions you should take. So let's do that.
Once upon a time, your trade association was probably allowed to offer health insurance to its members, and because of the size of its buying group it could negotiate lower premiums. The Affordable Care Act - for the most part - did away with that option back in 2010 and since then all employers who offer healthcare benefits to their employees had to purchase the mandated bronze, silver or gold plans - which all offered the same coverages although with different deductibles and out-of-pocket limits - from their insurance agents.
That’s all about to change. Essentially, this rule would allow associations to go back into the business of offering healthcare plans to its members. Here's five big ways it could affect your business:
Associations can be more easily formed.
The definition of "association" has been expanded. Under the proposed rule, an association can include a group of companies related to each other through things like industry or geographic region. In other words, it doesn't have to be a formal trade group - you can band together with others and form your own (with its own set of bylaws and rules) for purposes of buying health insurance.
Freelancers and small businesses can join.
Associations can only offer plans to their employees, former employees and their families and beneficiaries. But people that run very small businesses (self-employed "working owners" that meet certain minimum requirements) can also be considered "employees" of their companies and join an association to take advantage of potentially lower premiums. The definition of self-employed, working owners and employers is still being worked on.
Taxes and reporting requirements remain the same.
Regardless of whether you're running an established business with employees or you're one of the self-employed "working owners" with few or no employees, the proposed rules makes no change to the tax treatment of health insurance premiums paid: they're still deductible. For the most part, the reporting requirements under current rules for health plans would also be mostly unchanged.
Premiums could be better controlled.
The Affordable Care Act's essential health coverages imposed on the insurance industry are part of the reason why rates have continued to increase over the past seven years. However, the law exempts larger organizations from offering these mandated benefits - like mental health and pediatric services - if they meet certain requirements. The idea behind association health plans is to let smaller companies band together to form a larger organization that can take advantage of some of these exemptions and therefore reduce their premiums. Supporters also believe that, by banding together, coverages would be less expensive because of the association's buying power, bargaining position, economies of scale and through lower administration costs.
Certain employee protections remain intact.
Under the proposed rule, associations cannot deny membership due to any health factor (like medical history, genetic information, a disability or evidence of insurability) for any member and their family. There are also non-discrimination rules in place to ensure that one employer can't get better rates over another based on their employees' medical history.
Yes, there are definite downsides.
Remember - this is still a proposed rule and it’s open to comment through March 4th. Because this is not legislation, it’s subject to change depending on which party is in power and lawsuits are likely to follow. Like anything new where the details are still being ironed out, the likelihood of fraud and unscrupulous activities is significant. Enforcement will be a challenge. Rates for people in the individual market, if healthier people are drawn to these new plans, could go up. Subsidies currently received by some could be put in jeopardy. Employee protections and many essential benefits - particularly if more associations get exempted because they’ve become a larger group - could be lost to employees. And, of course, individual states may decide to take different paths and challenge the rule's legality.
But here's the thing: if this rule becomes effective the business community has a chance to have more say over its healthcare expenses and hopefully bring these costs under better control. If successful over the next few years, the plans could become more popular which would increase the likelihood of it becoming law.
Let's hope so. Healthcare really needs a killer app - and like any good app, even if there are a few bugs.