Employee benefit advisers say allowing small businesses more latitude to purchase health insurance through association plans, as the Trump administration has proposed, could be a beneficial option for providing benefits to their clients that employ up to 150 workers.
“It will be attractive to those smaller employers that want to band together and be able to take advantage of populations with good health,” says Katy Stowers, managing director and general counsel for benefit brokerage and consulting firm FirstPerson in Indianapolis.
Although AHPs have existed for nearly a decade, the Jan. 4 proposal by the Employee Benefits Security Administration would ease regulations that often hindered the creation of these offerings on a wide scale. Namely, these plans would be exempt from several rules in the Affordable Care Act, particularly requirements to provide comprehensive healthcare coverage.
Small businesses with younger and presumably healthier employees would benefit the most from these types of plans, Stowers says.
“You've got a lot of technology startups that are hiring younger folks who are relatively healthy but they're not able to take advantage of [buying health insurance] because they're community rated in the whole risk pool. If you are able to pull them together and get them into large groups so that they're rated on their own experience, that's going be beneficial,” says Stowers.
These types of plans have three advantages, says Jack Kwicien, managing partner of brokerage consultancy Daymark Advisers in Baltimore.
First, by banding together, small employers have stronger buying power which large employers already have and they may be able to get cost savings on stop-loss coverage, pharmacy benefits and more.
Second, Kwicien says these types of plans have the potential to lower administrative costs because employers are spreading the burden among more participants instead of just one employer buying insurance in a marketplace on a government exchange.
“And finally, because you're aggregating employee populations either by geography or by occupational or demographic group, you have the potential to have better risk pools,” he says. “That means lower claims costs.”
But there are downsides to these plans, warns Suzanne McGarey, managing principal for Ascende, a division of EPIC. Once these plans are in place, employees could become frustrated by the limited offerings of these low-cost plans, she says.
“It will be interesting to see if employees who are offered these plans opt for comprehensive coverage through the individual markets over time. Additionally, even plans that limit certain benefits to lower cost initially may not experience lower trends over time – other factors may contribute to steeply rising costs,” she says.
Proceeding with caution
Matt White, employee benefits adviser for The Employee Benefits Group in Bethesda, Md., says these solutions might be out of the comfort zone of more traditional advisers.
While there are brokers who embrace progressive ideas for their clients, he says, “There are also brokers glad to do things the way that things have always been done — fully insured plans that don’t provide claims transparency, or explanation of why/how a group’s rates have increased.”
Brokers may show employers these plans but caution them from signing on, says Mark Krogulski, managing partner of E3 Strategy.
“Many brokers have large blocks of clients with the one or two competitive carriers and may lose out on bonus or override payments if they move clients to an association type plan,” he says.
Overall, this proposal is not a sweeping change to how employers will offer coverage, says McGarey. “This changes the healthcare landscape in a limited way since it’s a small employer option, however, it remains to be seen if these changes are adopted on a broader scale over time.”
Since these small business networks already exist in some parts of the country, establishing one is not a big chore, says Kwicien. All a small business group would need is an underwriter and someone with third-party administration experience and a plan could be up and running in a few weeks.
Additional reporting by Cort Olsen.
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