This article will focus primarily on the identification and understanding of the varying health risks and costs of association health plan (AHP) groups and how best to align premium to these relative costs. While pricing is not the only risk that can have an adverse impact on AHPs, managing it is a key pillar to the long-term sustainability of these plans.
The DOL rule on AHPs
The final rule on association health plans was approved and implemented on June 19, 2018, by executive order, and communicated via the U.S. Department of Labor (DOL). The main purpose of these plans is to provide a platform where similar employers, including single-life owner-employees, could pool their healthcare costs and risks to provide health benefits to themselves and their dependents. The main objectives would be to find more affordable health insurance coverage for small employers, without some of the benefits mandated by the Patient Protection and Affordable Care Act (ACA). The main tenets of the rule are as follows:1, 2
- Employers may come together under a looser definition of commonality, such as industry or region.
- These AHPs do not need the previous definition of being bona fide associations to form health plans.
- Single-life employer groups, often referred to as employee-owners or self-employed groups, are permitted to enter an AHP.
- AHPs do not have to offer ACA-compliant plans.
- Nondiscrimination practices would be in effect for these new AHPs. Primarily, varying premium or declining coverage based on health conditions is not permitted.
- Premium can vary by other acceptable risk classes, such as group size, area, or industry, for example.
It is important to note that the U.S. District Court for the District of Columbia (D.C.) has recently ruled invalid and vacated some key tenets of this new rule.3
AHP risk management considerations
To bolster the chance of long-term success for these new AHPs, active risk management of their plans is necessary. Certain key areas need to be considered and will require specific attention and monitoring, such as member engagement, pricing strategies, and funding arrangements.Continue reading