Association health plans raise red flags for division

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The head of Colorado’s Division of Insurance is working to guarantee residents retain certain health insurance benefits.

Earlier this month, Interim Insurance Commissioner Michael Conway sent a letter to the U.S. Department of Labor about proposed rule changes with association health plans.

“What we are mostly concerned with is we don’t want to take a step back and go back through the same problems that we have had with these types of plans in the past,” he said.

The federal agency wants to broaden small business owners’ ability to band together as a single group to offer insurance, referred to as association health plans, a type of Multiple Employer Welfare Arrangement, Conway said.

A concern with the proposed rule changes is the association health plans would become exempt from certain state-mandated health insurance benefits or requirements of the Affordable Care Act, called “essential health benefits.”

“In Colorado, we have a fair number of mandates that even predate the ACA,” Conway said. “That’s because our state legislature has decided they are the types of things people need to be able to have covered.”

Maternity and some special needs care for children are examples of possible cuts employers could make to lower premiums with the association health plans, Conway said.

“A big one we always talk about is maternity care, which was required in Colorado and was in place long before the [ACA] came into play,” he said. “We’re basically concerned about the federal government kind of stepping in and saying the state mandates that we have in play aren’t important.”

Conway also is concerned that association health plans might cause further segmentation in the health insurance marketplace, he said.

“When you look at what these types of plans typically do, they pull what’s called the good risk or the healthy risk out of the individual market, and then what’s left is just the folks who are sick,” he said “That will necessitate the insurers to increase the insurance premiums in order to actually get enough premiums in the door to pay for those sick folks.”

While the “healthy risk” or younger group might pay less now, eventually they will find themselves paying the higher premiums, Conway said.

“Even if you are healthy now, at some point in your lifetime you are going to need comprehensive health insurance because you are going to have some sort of event in your life that necessitates it,” he said. “If we get to a point where we make it so astronomically expensive for everyone to actually have that comprehensive heath insurance, it’s not a sustainable marketplace to keep people insured and healthy.”

Prior to the 1980s, when association health plans were popular, there were both solvency and fraud issues, said Vincent Plymell, communications manager for the Colorado Division of Insurance.

“Basically, the money wasn’t being taken care of,” he said. “Some people were paying into these association health plans and then things weren’t done appropriately in terms of there being money there to pay people’s claims.”

America’s Health Insurance Plans, AARP and the Pharmaceutical Research and Manufacturers of America have all  voiced concerns about the proposed rule changes.

“The Department of Labor’s proposed rule on association health plans will likely push up premiums in the individual and small-group market, increase the number of uninsured and result in higher out-of-pocket costs for enrollees with significant health care needs,” AHIP said in a Feb. 28 blog post.

Meanwhile, the National Retail Federation applauded the rule changes in a Jan. 4 press release.

“Main street retailers need more affordable health care options and a level playing field with larger companies that are better positioned to negotiate for lower insurance costs,” NRF Senior Vice President for Government Relations David French said. “For years, we’ve called for AHPs to ensure that heath care coverage is within reach for small retailers and their employees, and today’s action by DOL brings us one step closer to making this commonsense reform a reality. We will review the proposal carefully and look forward to working with the department to expand access to AHPs across the country.”

Plymell said association health plans could possibly work if left to the state to regulate in a manner Colorado lawmakers and officials see fit, he said.

“They could be a good thing if they are done the right way with appropriate state oversight to make sure that the people who are getting enrolled in these plans are getting the insurance they pay for,” he said. “However, there still is that question: Is it good for the health insurance market overall to continue and segment more and more people out of it?”

To read the letter sent by Conway to the DOL, visit dora.colorado.gov/insurance