Association health plans could increase instability on ACA markets

The Trump administration’s plans to expand the availability of association health plans could siphon up to 4.3 million people from the individual and small group insurance markets over the next five years, raising premiums on those who remain in plans which are compliant with the Affordable Care Act (ACA).

The analysis from Avalere was paid for by health insurance lobbying group America’s Health Insurance Plans, though Avalere said it maintained editorial control.

Under a proposed rule from the U.S. Department of Labor, more small businesses, trade organizations and individuals would be able to purchase health coverage as a group by defining them as large group plans. This would exempt these plans from many ACA requirements, including the health benefits it has to cover, limits on medical-loss ratio and the ban on charging customers more based on pre-existing conditions.

Avalere said association health plans (AHPs) would fulfill their promise of being cheaper, charging customers $9,700 per year less in individual market premiums and $2,900 a year less in the small group market. This would thanks to attracting healthier enrollees off the ACA exchange—and in turn, leaving a sicker, more expensive risk pool on the individual market.

“The recent AHP proposed rule is expected to incentivize a larger number of healthy sole proprietors and groups to access the more affordable, potentially less generous coverage that could be available through an AHP,” Avalere said. “Conversely, those who remain in the individual and small group markets will pay more for their coverage, with an additional 130,000 to 140,000 individuals projected to become uninsured.”

The analysis said the ACA’s individual market premiums would go up by 3.5 percent while small group market premiums would rise by 0.5 percent compared to current law.

The proposed rule is one of several actions the Trump administration has taken which could expand the availability of plans which don’t follow the ACA’s insurance regulations. HHS has proposed allowing customers to stay in “short-term” insurance plans year-round, which could more dramatically raise premiums in the ACA market as individuals would no longer face a tax penalty for having non-ACA-compliant insurance after 2018.

Additionally, the agency has also yet to weigh in on Idaho’s plans to allow “state-based plans” which also don’t follow the ACA’s regulations, offering cheaper—but less comprehensive—coverage off the ACA exchanges.