A key concern is that the new plans will lack the ACA’s coverage requirements for individual and small-group plans.
June 19—Despite calls from major hospital groups to drop a proposed expansion of association health plans (AHPs), the Trump administration has finalized those rules.
The U.S. Department of Labor (DOL) issued a final rule June 19 that expanded AHPs, which are offered by employers in certain geographic areas or in a particular industry, to also include sole proprietors and their families.
The expansion of AHPs—which was expected to increase enrollment in such plans by 4 million people, according to a Congressional Budget Office estimate—aims to reduce administrative costs and strengthen negotiating power with providers through larger risk pools and greater economies of scale, according to a release.
“Many of our laws, particularly Obamacare, make healthcare coverage more expensive for small businesses than large companies,” Labor Secretary Alexander Acosta said in the release. “AHPs are about more choice, more access, and more coverage.”
Both the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) had urged DOL to withdraw the AHP changes when they were proposed, citing concerns that the expansion would “destabilize health insurance markets for individuals and small groups.”
Hospital advocates and other supporters of the Affordable Care Act (ACA) worried that expanded AHPs would siphon away healthy enrollees from the ACA marketplaces and thereby increase premiums, which would pressure more enrollees to leave those marketplaces.
“It’s certainly a big deal in the markets,” Keith Fontenot, a former healthcare adviser in the Obama White House, said in an interview. Fontenot, a managing director at Hooper, Lundy & Bookman, anticipated that the impact of expanded AHP use would occur in particular industries and among particular groups.
An Avalere analysis in February estimated 2.4 million to 4.3 million ACA marketplace enrollees would move into AHPs by 2022. As a result, premiums would rise in the individual-insurance market and the small-group market by up to 4 percent and 2 percent, respectively.
Others expected the rule to take years to have any measurable impacts on ACA marketplaces due to a range of logistical hurdles, such as likely new state laws regulating AHPs.
Also likely to slow down the effect of the AHPs was a change from the proposed rule, allowing for a phased-in approach. That change will allow fully insured AHPs to begin operating under the new rule on Sept. 1, 2018, existing self-insured AHPs to begin Jan. 1, 2019, and new self-insured AHPs to begin April 1, 2019.
AHPs could adversely impact existing ACA marketplaces also by discouraging enrollment of less appealing groups, offering coverage only in geographic areas where they determine healthier individuals reside, and manipulating benefits to lessen the appeal of AHPs to individuals who need access to more comprehensive health care.
“This segmenting of risk would result in higher and increasing premiums for individuals left out of associations which could spiral over time: ever worsening adverse selection that would destabilize the non-AHP products,” Chip Kahn, president and CEO of FAH, wrote in comments on the earlier proposed version of the rule.
To address this concern, regulators amended the proposed rule to require AHPs to “have at least one substantial business purpose unrelated to offering and providing healthcare coverage or other employee benefits to its employer members and their employees, even if the primary purpose of the group or association is to offer such coverage to its members.”
Hospital groups were particularly concerned that the expanded health plans would not be required to cover the ACA’s essential health benefits (EHBs).
“It is not patients alone who will feel the impact of less comprehensive insurance coverage,” Janis Orlowski, MD, chief healthcare officer for the Association of American Medical Colleges, wrote to DOL. “Hospitals and physicians will find themselves treating more patients who are uninsured or underinsured.”
However, in the final rule, DOL said mandating EHBs for association plans would “run contrary to the goal of leveling the playing field between small employers in AHPs, on the one hand, and large employers, on the other, who generally are not subject to the EHB requirements. Furthermore, such a mandate could reduce AHPs’ flexibility to tailor coverage to the particular needs of the members of the group or association offering the benefits, and thereby reduce access to AHPs by making them less attractive options for providing affordable coverage.”
Positive provisions from the perspective of hospital groups’ perspectives were requirements that bar AHPs from excluding coverage for preexisting conditions, imposing lifetime and annual dollar limits on health benefits, or discriminating based on health factors. Additionally, AHPs that provide dependent coverage must permit dependents to remain enrolled until they reach the age of 26.
Fraud and Abuse Concerns
Hospital advocates also worried that many of their patients with AHP coverage would be vulnerable to fraud and abuse by loosely regulated plans that fail to provide promised coverage or that fold completely.
The final rule rejected calls for a larger or overriding federal role in regulating such plans—which primarily fall under the purview of the states—and instead pledged “close cooperation” with state regulators to guard against fraud and abuse.
DOL noted that since 1985, it has pursued 968 civil enforcement cases involving such plans, and 301 have yielded a total of more than $235 million in “monetary restitution.”
However, DOL “anticipates that the increased flexibility afforded AHPs under this rule will introduce increased opportunities for mismanagement or abuse, in turn increasing oversight demands on the department and state regulators.”
To help address that increased risk, DOL plans to hire 150 additional employees and spend $136 million more over the coming decade to better oversee AHPs.
Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare