Amidst the angst over health insurance’s skyrocketing prices, fears of pre-existing condition exclusions, and political divisions over the best way to serve our communities, we get to finally peak at the first iteration one of 2018’s more interesting developments with the rollout of the new generation of Association Health Plans (AHPs thanks to insurance’s love affair with acronyms).
The final rules surrounding Association Health Plans issued this June gave us some intriguing scenarios and established something different within the current marketplace for small employers. And like most things that are “innovating” our healthcare and health insurance offerings, the innovations driving down price can be classified as “everything old is new again”, but more on that later.
Here’s the super simplified quick overview of this new rule:
- New Associations can be based either
- Common Geographical Regions, or
- Belonging to the same trade, industry or professions
- Old Association Plans can operate under old rules or new rules—their choice.
- New Associations can establish and launch “Fully-Insured” plans as early as Sept 2018.
- Old Self-Funded Association Plans can expand under new rules starting Jan 2019
- New or Old Associations may launch “Self-Funded” plans starting as early as April 2019.
What’s happening in Texas
As of this writing, we are seeing Full-Blown health plans being offered through 5 state associations health plans with United Healthcare as the backing insurance plan. We are also seeing some Independent Contractor and Gig-Wage workers participating in an association that is offering plans that don’t typically have unlimited benefits, but that address the functional areas of healthcare at a greater degree than the catastrophic areas of health insurance.
The Associations using United Healthcare
There are 4 regional associations currently developed and aligned with local area chambers of commerce and one statewide non-profit association, that span all counties in Texas when you add them together.
- The North Texas Employer Health Plan Cooperative
- The Collin County Health Plan Cooperative
- The West Texas Employer Health Plan
- HealthyVIEW of East Texas
- BFF Texas Children Battling Cancer
The plans and the savings potential
Plans being offered are the exact same plans currently being sold and marketed to the 51-100 employer size segment in Texas. The plans have not been reduced in benefit scope and have avoided all stigma of the “skinny” plans.
Each Association has some limited variation in the plans offered, but not any limitation that a consumer would notice as all of these Associations offer 35+ different plan designs that span across the United Healthcare PPO (Choice Plus network), EPO (Choice network), HMO (Navigate and/or Charter networks).
And the big question, of course, is price
Plans get some pretty extensive differences here in their Underwriting and Pricing of Health Plans to employers who join one of these associations versus typical ACA Community Rated health plans.
Lets’ start with the big question. Are there any health questions? Answer: NO. This isn’t allowed under the rules for these types of Associations. So, let me repeat: No Health Questions, no Medically based underwriting.
How are they cheaper?
Larger group plans don’t have to cover all the same Essential Health Benefits, so these plans immediately cut out the never used Pediatric Dental and Vision Benefits. (they still all preventive care services at a no charge)
These plans also allow rating to be based on Gender, Industry (SIC) and an expanded rate spread between ages 21 to 65. (ACA plans have a 3:1 ratio, these UHC AHP plans will offer a 10:1 ratio)
Who is the winner here?
Younger, Male dominated employers in a lower risk industry will see the biggest savings spread over their current small group rates.
All small groups should see some rate relief in these arrangements, but the big questions become how much rate relief and what is the “starting point” at which United Healthcare will discount from?
If a 15% discount is to be the rough ballpark expectation, this may not have as much sizzle for the groups that are older or in a higher risk industry like a medical practice, construction trades or legal practice.
For January 2019, we see Blue Cross and United Healthcare as the #1 & #2 price leaders for robust plans that both offer the largest selection of Doctors and Hospitals in their networks in the Fully-Insured ACA mandated employer offerings. However, we see Blue Cross offering similar plans at an 8% discount over United Healthcare. This can erode the sizzle of a 15% discount down to only 7% savings quickly. Decision makers should look closely at the differences in formulary lists, mandated pre-authorization and mail order practices as well as specific providers in each network.
Also, of note here, is the expanded “perk” offering on the United Healthcare H.S.A. qualified plans. These association plans include the UHC Motion program on these high deductible health plans and the ability to earn cash for wellness behaviors (walking) is a big differentiator versus the standard reward/points-based programs from the other insurance plans in this market.
What about compliance?
Employer Penalty and Reporting?
According to the IRS’ Q&A, the employer shared responsibility rules do NOT apply if an employer that is not otherwise an ALE (applicable large employer) offers coverage through an AHP. Whether an employer that offers coverage through an AHP is an ALE subject to the employer shared responsibility provisions depends on the number of full-time employees (and full-time equivalent employees) the employer employed in the prior calendar year. The determination of ALE status is unrelated to whether the employer offers coverage through an AHP.
In regular speak: Small Employers under 50 employees aren’t subject to the Employer Mandate in terms of penalty or reporting requirements. United Healthcare on these plans will also issue the 1095b IRS forms, same as small group fully insured plans today.
COBRA does now apply. Regardless of the employer’s actual size of under or over 20 employees rule that typically determines criteria to decide if Texas State Continuation or COBRA applies, all employers who offer these AHP plans will be included as COBRA eligible.
All employers are held to the ERISA fiduciary standards. Summary Plan Descriptions, Summary of Material Modifications and Summary of Benefits and Coverage requirements are all applicable here. It is also of high interest based on past history of AHPs that employers that are members of an AHP take seriously their fiduciary duty to monitor the AHP and get periodic reports on the fiduciaries’ management and administration of the AHP whether directly or through oversight of the form 5500 filings or the M1 forms for MEWAs.
But what about the price versus Level-Funded health plans?
Well, that is a big question.
The answer spans not only just the final price cost, but a health experience, control over coverage issues, and data transparency opportunities. Nothing will likely outweigh the difference in price. It is my opinion based on the first set of quotes I’ve run, that most of the Level Funded plans will be similar in price point to these Association Health Plans, except in the case of a group currently experiencing less than desirable health or in a Level-Funded carrier-based block that has overall underperformed on price controls to the point that their base rates have already exceeded ACA regulated rates such as the case for AllSavers clients in North Texas.
Just my opinion here again, but, I expect to see groups who are aggressively using cost-containment measures in a Level-Funded plan in our small group 2-50 market segment out-perform these association health plans. This is due to my assessment that United Healthcare hasn’t added in any extra long-term cost reductions in the cost of healthcare spending over and above their normal solutions in the 51-100 market segment that are still producing renewal increases every year. A progressive employer implementing High-Value Primary Care and/or rewarding employees for smart buying decisions through an advocacy program focusing on cost & quality will be in a much better position to control their costs in the future than through partaking in the Association Health Plan community.
The Admin Cost and Agent Compensation
When joining an Association Health Plan, both the Employer and the selling broker must belong to the association or chamber of commerce. In some instances, the broker or employer may have an extra annual admin fee in the range of $50 to $200 to be paid.
United Healthcare will be compensating the selling agent or agency on these plans at the 4.5% commission of total plan costs and will not be allowing for an agent to carve out or change this commission structure. Most associations are also receiving an admin fee on these plans in the range of .05% of health plan premium to help offset the cost of administration and verification of active association membership. The BFF non-profit will be using any excess proceeds to help further their support for families in the midst of battling childhood cancer.
The Independent Contractor Associations
Several groups have launched in this area and they seem to be tackling the issue of independent contractor/ Individual Health insurance in 3 main approaches:
- Minimum Essential Coverage “Plus” plans that include preventive care, coverage for limited frequencies of sick visits including Office Visits, Urgent Care, Imaging and some expanded coverage for prescriptions.
- Limited Benefit plans without preventive coverage but with increased daily or per service dollar amounts for office visits, surgeries, emergency rooms, and hospital-based care
- Medical Sharing plans or Healthcare sharing ministries.
The price savings I have seen on these plan in the MEC Plus or Limited Benefit plans have typically been in the $20 to $30 per month range off their regular pricing. That can take a $90 plan down to $70 which is a huge discount and allow for an independent contractor to save over 20% or buy a plan with slightly more robust coverage.
Looking at the NCBA (National Consumers Benefits Association) we see what looks to be a wide range of member benefits that have a big place in both a price point and consumer value perspective. The actual benefit plans really boil down to the plans we are already familiar with on the group basis, now offered to individuals through the association platform with programs from Apex, Beazley, and Sedera these are attractive for this market.
What’s right for you?
Association Health plans should not be ignored. Much like ignoring the Level-Funded or Self-Funded health insurance market could violate your fiduciary responsibility to your employees, so could ignoring the Association Health plan options coming rapidly into our area.
I would suggest a robust discussion and price point comparison to be a well -informed consumer.
I would also suggest doing everything possible to structure a 3 to 5-year strategic plan for your health plan benefits and discuss how you plan to eventually pay less for health care in order to pay less for health insurance over the next few years.
And with every suggestion I give, let’s talk about anything you want a deeper discussion about.
Resources you may want to check out regarding Association Health Plans as well as our case studies focused on reducing your costs as well as the expenses your employees.
About the author: An avid learner and resourceful leader with a passion for problem solving, Bret is a calming force in the chaos and fast paced evolution of health insurance, employee benefits, and the growing burden of regulatory compliance. He helps people develop the confidence to see beyond the problem at hand and start to re-imagine their goals. Whether he’s helping a client or a colleague, Bret believes a successful interaction is one that allows us all to dream a little bigger when we’re done.
About AG Insurance: AG Insurance (www.agiainc.com) helps employers and their employees with solutions focused on positive organizational impact and improved employee experiences.