The White House and the Department of Labor has issued a final rule on association health plans (AHPs).
AHPs are group health plans that allow small employers access through associations to the regulatory and economic advantages available to large employers.
The reform allows AHPs to be treated as a large group health plan for the purposes of the Affordable Care Act, which it is hoped will allow them to obtain health coverage at a lower cost.
Additionally, the rule will allow AHPs to be formed based on a geographic test, such as a common state, city, county, or a metropolitan area across state lines. The rule will also allow working owners without employees to join.
The Congressional Budget Office estimates that four million Americans, including 400,000 who otherwise would lack insurance, will join an AHP by 2023.
The legal, regulatory or preemption framework of Multi-Employer Welfare Arrangements (MEWAs), of which AHPs are one, will not be impacted by the rule.
Under the new rule, as of 1 September 2018, all associations will be able to form a fully-insured AHP.
All associations will be able to form a self-funded AHP from the 1 April 2019 onwards, unless they are existing associations that sponsored an AHP before or on the publication date of the final rule in the Federal Register, which will be able to form self-funded AHPs from 1 January 2019.
Phil Giles, vice president of sales and marketing at QBE North America, suggested the rule may have a future impact on the medical stop-loss captive market but not for three to five years.
Giles suggested that most AHPs will establish as and remain in a fully-insured structure until sufficient mass (over 1,000 lives) and credible track record (five years) can be attained.
After which point, Giles expects a large number of AHPs to convert to a self-insured structure as this will allow them to capitalise on a self-insured plans ability to preempt state insurance regulation and benefit mandates.
Giles explained: “I would expect that a significant number of the self-insured AHPs would then explore the assumption of stop-loss risk in a captive as a way to maximise the effectiveness and efficiency of the overall programme.”
He added: “I expect that AHP legislation will pass in some form; this will enable the broader formation of MEWAs. Once the self-insured AHPs first establish appropriate solvency and credibility, the market should see a fairly significant number placing medical stop-loss into a captive.”