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Association Health Plans: The Savior For Small Business?
Access to affordable group benefit rates that offer comprehensive benefits to employees can be a real challenge. Pile on top of that strict individual underwriting rules for self-funded plans and the expensive “Affordable” Care Act premiums for small business and the task can become even more daunting. As a small business, how do you gain access to some of the ‘sweeter’ employee benefit programs out there when you don’t really qualify for them given your size?
Well, you’ve come to the right blog post!
There is a new group benefit program offering in the small business segment that may help a business ‘push through’ some of these obstacles to the beautiful green pastures of affordable group benefit plans. The solution? They’re called Association Health Plans (AHP). You may be aware that the administration in late 2018 modified some of the rules regarding AHP’s which makes them more readily available to small businesses. The truth is, Association Health Plans have been ‘a thing’ for a long time, but historically they had to be tied to a specific industry and there simply weren’t that many of them that actually lasted. Today we’re going to help navigate some of the in’s and out’s of AHP’s!
What’s Old Is New Again
In the old AHP model, underwriting was allowed so groups would have to answer medical questions and /or have claims data reviewed before they would be allowed to join the club. In today’s AHP, there is no individual or claims underwriting per se, all of the rates are based on a company’s demographics so the underwriting is based on the census information – so ages, genders, locations, etc are taken into consideration for the group as a whole but nobody is individually underwritten.
This approach is fairly new, about 90 days or so at the publishing of this blog, so this approach is in its infancy and not a proven method yet. However, it does provide small businesses another group benefit option to consider. All of the options allowable right now are fully insured, but as of April 1st, 2019 self-funded options will become available as well.
Time will tell how these self-funded AHP’s will get priced out given some of the restrictions on underwriting with the new AHP regulations, we’re very curious to see what vendors are willing to enter into this arena with the limited underwriting capabilities.
With regard to what’s available now, the benefit in the AHP approach is that all of the plans being offered are mid-market plans, so small businesses are getting the opportunity to enroll and choose from plans that are normally only available to businesses with 51+ employees. There are some distinct advantages there. They include, no pediatric dental mandates for groups with no dependent children, no maternity charges for groups with all male employees or employees who are not in their family growing stages, etc.
The AHP Nitty Gritty
The AHP’s being offered right now in Texas are through either local Chambers of Commerce or through a state-wide non-profit that has partnered with a well known large insurance company. They offer businesses who are not working with a Chamber or who maybe aren’t in a geographic area close to a Chamber the opportunity to still take part in an AHP.
Currently this is a program for small businesses, so right now by definition that means companies with 1 – 50 employees, but said big insurance company will not write an AHP on a company that has only 1 person signing up, so in practice this is an option for small businesses with 2 – 50 average and enrolling employees. However, you still have your common participation and contribution requirements. None of those parameters have changed.
As a company, you still need to be coming to the table with at least half your population signing up and you still need to pony up at a minimum 50% of the employee- only cost. From what we’ve seen so far, the most competitive AHP pricing has been specific to employee populations that have a predominantly younger average age and an overall male vs. female population. If it sounds like the insurance company is cherry picking certain populations for this program, they effectively are. These are their underwriting guidelines as they stand right now. Hopefully, in time, this will be a profitable approach for said insurer so that they are able to loosen up on some of their underwriting so more diverse populations will be able to take part.
Why Should I Care About Association Health Plans?
As we’ve previously discussed in prior blog posts and videos, to date, there have really only been two different group benefit markets for small businesses to pursue, the fully insured Affordable Care Act (ACA) programs, which are really only available from a small number of insurers, and also level-funded plans that require underwriting. The drawback to level-funded programs is simply that many businesses cannot qualify because these programs require a claims data review or health questionnaires or both so that the insurance providers can completely underwrite the group.
If a group has sometimes just one health condition, that can make the entire population unable to move forward in this market. This process disqualifies a good number of employers. Newsflash: in America, most of us are not very healthy, so that makes this space difficult sometimes. The fully insured ACA plans in most instances are going to be 25 – 30% more expensive than your level- funded programs with similar benefits. The small group fully insured space has done nothing but get more expensive since the Affordable Care Act passed.
These new AHP’s add an additional third market option for a small business to consider. They aren’t a great fit for every business out there, but no single market is. Like with anything new, it will take a while for more vendors to get into this space and for these to evolve, but we are at least excited that there’s a new, 3rd market option available now for businesses to consider and it doesn’t require individual underwriting.
Since the Affordable Care Act went into effect, numerous insurers have exited the health insurance space completely while many other stopped working in the small group space and now only sell large group benefit health plans. Despite the fact that these AHP’s do not seem to be making a huge impact just yet, we are welcoming them with open arms. Post-Affordable Care Act any new development in the small and medium sized business space is a positive.
A Final Thought
We know for a fact there are businesses out there that have, on average, younger work forces but they may have 1 or 2 employees with some health conditions so they cannot get through underwriting. That is where these AHP’s come in. An AHP would be a perfect solution for a company in that type of situation! They would be able to get out of the fully insured ACA small business space and into the AHP fully insured space and ideally could cut costs 15 – 20% and at the same time.
At the end of the day, the small and medium sized business group benefit market is completely under-served when it comes to employee benefits in general, so we will continue to work in this space and share knowledge and resources as we are doing here to help as many people as we can because most people in our shoes can’t or won’t.
To get to get more of your questions about Association Health Plans answered, or to get started in becoming part of an AHP, reach out to us at 214-329-0097 or info@hollowaybenefitconcepts.com. You can also contact us through our website at hollowaybenefitconcepts.com
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About Holloway Benefit Concepts
HBC was founded in early 2011 by Ryan Holloway. After serving over 8 years on active duty in the US Marine Corps, Ryan transitioned from being a full-time marine into an HR professional in early 2003. This began a journey and awoke a passion for helping companies who value their employees. After spending time working with a COBRA and FSA Administrator, an insurance company, and a large brokerage, Ryan realized that there were more unique and creative solutions for businesses than other companies were willing or able to realize. Seizing on his own entrepreneurial spirit, Ryan set out to found an independent agency designed to provide unique and original insurance solutions. To learn more about HBC, visit https://hollowaybenefitconcepts.com/
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