How An Association Health Plan Works
AHP’s are essentially group health plans available to an organized group of employers who have formed a single association group. This enables small companies to be pooled together under a single AHP as a single large group; improving everyone’s cost of insurance and plan stability. Access to these associations was more limited prior to a recent executive order by the Department of Labor.
New Regulations Regarding Association Health Plans
A new rule regarding AHPs was handed down by executive order on June 21st. So what does this executive order do, exactly? In short, it makes it easier for small businesses to form associations for the purpose of obtaining health insurance. Prior to this 2018 ruling only businesses in the same industry were allowed to form an association and only if it wasn’t specifically being formed for the purpose of establishing an AHP. In other words, there had to be other common objectives for the association besides health insurance. Now, not only will common geographic area enable businesses to form associations and obtain AHP’s but the new regulation also allows sole-proprietors to join in. The rule kicks into effect on September 1st, 2018.
For a more in-depth look at the ruling and who is now permitted to join an AHP, you can view the official guidelines. This new ruling doesn't bring about a major change in functionality, but it could have a large impact on how smaller organizations offer healthcare to their employees going forward.
Why This Ruling Is Important
As mentioned above, these association health plans allow a smaller business to pool it’s risk with other similar groups in order to benefit from large group pricing. But, an even more valuable outcome is that it has the potential to enable small employer groups to be able to embrace alternative methods for funding their employees’ health programs; methods which previously have only been offered to larger organizations. Small employers have thus far been confined to only using fully insured health plans, which means the insurance carrier, broker, and even some healthcare providers have been experiencing a large and lucrative profit margin off of the employer’s paid premiums. These centers of profit increase the amount the employer has to pay for his employees’ coverage and drive up his expense each and every year.
As part of an AHP, the small employer could have access to a self-funded consortium plan model and even be able to join a captive Stop Loss insurance policy, acquire an independent provider network, and engage a transparent pharmacy benefit management supplier; which are all steps that will remove the profit centers from their health plan pricing. So what does this mean? It means a level of control over your group health plan that you’ve never had before, more affordable premiums, lower healthcare expenses for you and your employees alike, and long term cost containment strategies that will prevent large rate increases year over year.
It also appears that AHP plans are exempt from some ACA regulations, such as needing to provide "essential health benefits" like as maternity care, pediatric care, and mental health services. The regulation is still under review for it’s September 2018 release, but provided the new ruling does allow for this flexibility, smaller business with fewer employees will be able to tailor their plans more specifically to the needs of their workforce.
Keeping Up With The Pace Of Regulations
Keeping up with all of these new laws and regulations isn't easy - especially for a smaller organization - but it can really pay off in the end. Rulings like this can often fly under the radar while you're focused on other aspects of your business but they have the potential to dramatically change how you run your operation and what you have to spend to do so. Your employer sponsored health program is an operational expense first and foremost; and in many companies it is the second largest, right behind payroll. The ability to lower that cost for you is directly tied to regulatory changes like this and processes that challenge the status quo of the insurance industry.
If your business has trouble keeping up with the blistering pace with which new laws and regulations are passed, you may consider outsourcing some of these duties. At Summerlin-Roberts we provide a variety of services including cutting-edge health plan savings strategies. Please, contact us today to learn more about how we can help you manage your risk and keep up with new developments.