Provision of BCRA could ‘radically reconfigure small-group’ insurance

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The Senate GOP health reform bill announced Thursday includes a provision that would approve a small-group health plan to be sold in any state if it meets association health plan criteria. It could change the dynamic of small-group insurance by allowing SMB health plans to function like those of a large employer.

To receive approval in other states, the small group plan must be classified as an association health plan, which mandates it be organized as a permanent entity, is established for a purpose other than providing health benefits and does not condition membership on basis of minimum group size, according to text included in the Better Care Reconciliation Act by Senate Budget Chairman Mike Enzi (R-Wyo.).

By permitting states to allow multiple, unaffiliated small employers to pool their employees for the purpose of purchasing, the plans would “create real purchasing power that small businesses could never have on their own,” Enzi says in a statement. “This will allow them to negotiate for better prices and greater benefits.”

He adds that it answers the requests that he has heard from small businesses for years regarding the need for greater flexibility and more options for providing health insurance coverage to their employees.

In allowing small groups access to larger benefit plans, the proposed expansion of association health plans could “radically reconfigure the small-group market,” says Scott Sinder, partner at law firm Steptoe & Johnson LLP.

“It’s a big deal and will be interesting to see how it plays out,” Sinder, outside counsel for broker trade group The Council of Insurance Agents & Brokers, says. For small-group health plans that move to an association health plan, it would allow the creation of a national health plan tailored to their needs that is exempt from community rating rules and the Affordable Care Act’s essential health benefit provisions.

Education needed
While the requirement to offer essential health benefits will become a state decision in the GOP bill, employers need to know that these association health plans will likely be different from previous small business plans, regardless. “It is going to be a lot of education process [to ensure] folks understand the new plan design,” says Marcy Bruckner, vice president of government affairs at the National Association of Health Underwriters, a broker trade group.

“Imagine the economies of scale with” these plans, Sinder explains. “There will be lots of focus on configuring products in that space designed for specific associations,” based on each group’s individual needs due to the makeup of their workforces.

Despite uncertainty over reform efforts in Washington, advisers need to help clients prepare for next year now.
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Advisers need to understand what this expansion of association plans means for employers who are interested, adds NAHU’s Bruckner. For example, association health plans often have narrower networks than traditional health insurance options. Advisers will therefore have to inform clients of the potential of having fewer provider choices with an association plan. Employees need to understand the impact of a narrow network and make sure they are OK with it, because for some, this would be a deal-breaker, Bruckner explains.

Ronnell Nolan, CEO of Health Agents for America, another broker trade group, is concerned about the long-term impact of association health plans. Previous versions available before the ACA attracted very sick risk pools, she says, because healthy groups would leave the plan as rates went up.

“Looking at the past, association health plans have not worked,” Nolan says. “For those to be a positive [option] for small group, there has to be some changes,” such as making the plans be fully insured versus self-insured.

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