Avalere Health: "Association Plans" earn their "ass" moniker

2018 MIDTERM ELECTION

Time: D H M S

This morning I took a look at the "Short Term, Limited Duration" policies (aka "Short-Term Plans"). Now comes the other half of Donald Trump's #ShortAssPlans executive order: "Association Plans".

I've obviously already written a bunch of stuff about this, including links to a few impact projection analyses, but this one was put together by Avalere Health on behalf of America's Health Insurance Plans (AHIP), which is one of the two major insurance carrier lobbying groups (the other one is BCBSA). On the surface you may expect a whitewash: "Oh, look at that, a report commissioned by Big Insurance is releasing a report claiming that these policies would be awesomesauce, big surprise!"

However, the actual analysis is quite different than what you might expect:

Association Health Plans (AHPs) are health insurance arrangements sponsored by an industry, trade, or professional association that provide health coverage to their members—typically small businesses and their employees. Health insurance coverage offered through AHPs aims to make coverage available and affordable for small groups and individual employees. Importantly, these arrangements are currently governed by state and federal requirements and are subject to state oversight, including standards related to premiums and benefit requirements.

A recent Department of Labor’s (DOL) proposed regulation would seek to broaden access to AHPs by expanding eligibility and potentially allowing a larger number of these arrangements to be exempt from certain Affordable Care Act insurance protections—including coverage for essential health benefits and community rating requirements.

The proposed AHP changes are expected to have an impact on enrollment and premiums for existing individual and small group market plans. Individuals and small businesses shifting out of their respective markets into AHPs are expected to be healthier than average, fueling adverse selection. This adverse selection could increase individual and small group market premiums and could lead to decreased competition in those markets due to changes in issuer participation.

The report that follows estimates the premium and coverage impact of the DOL proposed rule over a 5-year period (2018-2022). If the rule is finalized as proposed, we estimate the following impacts on the individual and small-group markets:

  • Higher premiums in both the individual and small-group markets. If the proposed AHP rule is finalized, Avalere projects premiums would rise in the current individual (2.7% to 4.0%) and small group (0.1% to 1.9%) markets relative to current law, largely due to healthier enrollees shifting into AHPs. This trend will lead to the individual and small group market risk scores rising.
  • Increase in the number of uninsured Americans. The proposed rule is projected to lead to 130,000 - 140,000 additional individuals becoming uninsured by 2022, compared to current law. The increased number of uninsured is largely caused by premium increases in the individual market as healthier enrollees shift into AHPs.

These projections (2.7 - 4.0% rate hikes and 130K - 140K uninsured increase by 2022) may seem fairly small, especially over a 4-year period, but these are on top of the additional 10%+ rate hikes expected due to individual mandate repeal and the additional rate hikes caused by Trump's expansion of Short-Term plans as well.

  • An additional 2.4M to 4.3M peopled enrolled in AHPs. This figure represents people switching out of the individual market (0.7M to 1.2M) and small group market (1.7M to 3.2M) into the expanded AHPs.
  • Lower premiums for enrollees that enroll in AHPs. Premiums in the new AHPs are projected to be between $1,900 to $4,100 lower than the yearly premiums in the small group market and $8,700 to $10,800 lower than the yearly premiums in the individual market by 2022, depending on the generosity of AHP coverage offered. While AHPs will likely offer lower premiums for many enrollees, the largest premium differences assume AHPs offer less-generous benefits than current markets, which could expose some enrollees to high out-of-pocket costs, particularly those that have significant healthcare needs.

Well yeah, of course...a bunch of people will snap up the junk plans. Hardly surprising.

The AHP proposed rule continues a trend under the current administration toward increased regulatory flexibility. While this flexibility may lead to lower premiums for some (particularly younger, healthier individuals and small groups), it is likely to further adverse selection out of the individual and small group markets that could lead to increased premiums in those markets and create additional market instability.