In October 2017, the Trump administration issued the “Executive Order Promoting Healthcare Choice and Competition Across the United States.” This sought to provide additional health insurance coverage options for small groups and individuals outside of the Patient Protection and Affordable Care Act (ACA) market. One option the executive order addressed directly is the association health plan (AHP) for small groups and certain individuals.
In January 2018, the proposed rules for AHPs were issued, and in June 2018, the final rule was released.
Prior to the release of the final rule, associations did not have a well-defined pathway to being determined bona fide. Instead, each association’s facts and circumstances were evaluated against three broad issues:
• Does the association exist for a purpose other than providing benefits?
• Do employer members of the association have a close enough relationship to be essentially a single common entity?
• Do employer members control the health plan in form and substance?
With the new pathway identified in the June final rule, the second criteria is made much more explicit and can be satisfied by demonstrating that association members share a common industry or geography.
Many, if not most, of the currently existing associations, including local and national chambers of commerce, local or national industry groups, professional groups, and regional interest groups, could fairly easily fulfill all the conditions to become a bona fide association under the latest rules and thereby offer a large-group health plan as an employer. This was not the case prior to the president’s executive order.
In this article, Milliman consultants Fritz Busch and Jason Karcher examine the final rule released in June, evaluate considerations for sponsors of AHPs, and briefly assess the final rule’s impact on the small-group health and individual markets.
The requirement that every American have healthcare coverage or pay a financial penalty was one of the key provisions of the Patient Protection and Affordable Care Act (ACA). Known as the individual mandate, it was one of the most controversial provisions of the ACA. Some questioned its legality and others questioned its effectiveness at driving insureds into the insurance pool.
The U.S. Supreme Court settled the issue of the mandate’s legality in 2012, ruling that attaching a financial penalty to a failure to purchase health insurance did not run afoul of the U.S. Constitution. This decision, though, did not settle the issue of its effectiveness. And in late 2017, Congress enacted the Tax Cuts and Jobs Act, which reduced the financial penalty to $0 beginning with the 2019 mandate year, effectively eliminating the individual mandate.
Understanding the impact of this change on the health insurance risk pool is important to both insurers offering ACA-compliant products and state policy makers evaluating alternatives to the individual mandate. Health insurers—now in the process of setting rates for 2019—need to understand how elimination of the individual mandate penalty will affect future enrollment rates, which have a significant impact on rate projections. Some states are considering implementing state-based individual mandates, in some cases in conjunction with a Section 1332 State Innovation waiver.
In this paper, Milliman’s Andrew Bourg, Fritz Busch, and Stacey Muller discuss the significance of the individual mandate and model the impact of eliminating it.
The individual mandate is one leg of the “three-legged stool” of the Patient Protection and Affordable Care Act (ACA). During the crafting of healthcare reform, insurers and other market experts contended that the mandate was absolutely necessary for a functional individual guaranteed issue market. With the passage of the Tax Cuts and Jobs Act of 2017, there are renewed concerns related to the stability of the individual market.
Milliman consultants Fritz Busch and Paul Houchens believe that the individual mandate’s financial penalties at face value are high enough to induce high insurance participation rates, but that the enforcement of these penalties has not been strict enough to fully achieve the mandate’s policy aims. They say that available premium assistance in the insurance marketplaces may provide sufficient financial incentives to prevent a collapse of marketplace enrollment rates resulting from the mandate’s repeal. In their paper, Busch and Houchens examine available empirical data to arrive at this conclusion.
Milliman’s Paul Houchens and Fritz Busch will speak at this year’s National Conference on the Individual and Small-Group Markets hosted by America’s Health Insurance Plans (AHIP) on March 8 in Washington D.C. The consultants will talk about the role that reinsurance and high-risk pool programs may play in the individual market. The talk is based on their published paper “Reinsurance and high-risk pools: Past, present, and future role in the individual health insurance market.”
For more information about the conference, click here.
The Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States, signed by President Trump on October 12, could have a significant effect on both the individual and small group health insurance markets. The extent of any impact on either market will vary depending on how the executive order is interpreted and implemented by administrative agencies as well as whether those interpretations hold up to legal challenges.
This article by Milliman consultants Fritz Busch, Erik Huth, Nicholas Krienke, and Jason Karcher summarizes the executive order and analyzes key considerations and potential impacts for commercial health plans.
While there is significant uncertainty regarding current healthcare reform legislation, reinsurance and high-risk pool (HRP) programs are likely to play a role in attempting to stabilize individual market enrollment and premiums. In this paper, Milliman consultants Fritz Busch and Paul Houchens examine the following issues related to reinsurance and HRPs.
• The historical uses of HRPs prior to the implementation of the Patient Protection and Affordable Care Act (ACA)
• The role of reinsurance under the ACA, including emerging state-based programs developed using Section 1332 State Innovation Waivers
• The proposed usage of reinsurance and HRP under the American Health Care Act (AHCA), as passed by the House on May 4, 2017
• Considerations for states that are examining the creation and deployment of these types of mechanisms