Association health plans: what's all the fuss about?

Health Affairs

Volumn 25, Issue 6, 2006, Pages 1591-1602

  Kofman, Mila ^a   Lucia, Kevin ^b   Bangit, Eliza ^b   Pollitz, Karen ^b  

^a GEORGETOWN UNIVERSITY   (United States)

^b NONE

Author keywords

[No Author keywords available]

Indexed keywords

ACCOUNTING; ECONOMICS; GOVERNMENT; GOVERNMENT REGULATION; HEALTH CARE COST; HEALTH CARE ORGANIZATION; HEALTH INSURANCE; HOSPITAL PURCHASING; HUMAN; INSURANCE; LEGAL ASPECT; ORGANIZATION AND MANAGEMENT; POLICY; POLITICS; REVIEW; UNITED STATES;

ACCOUNTING; GOVERNMENT REGULATION; GROUP PURCHASING; HEALTH CARE SECTOR; HUMANS; INSURANCE CARRIERS; INSURANCE POOLS; INSURANCE, HEALTH; ORGANIZATIONAL POLICY; POLITICS; SOCIETIES; STATE GOVERNMENT; UNITED STATES;

EID: 33845340517     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.25.6.1591     Document Type: Review

References (53)

1. M. Kofman and K. Polzer, "Federal Association Health Plans: Will This Proposal Remedy the Health Insurance Crisis?" Policy, Politics, and Nursing Practice 5, no. 3 (2004): 167-173.
2. Unlike H.R. 525, S. 1955 would not permit self-insured associations. See M. Kofman and K. Pollitz, "Health Insurance Regulation by States and the Federal Government: A Review of Current Approaches and Proposals for Change," Journal of Insurance Regulation 24, no. 4 (2006): 77-107.
3. Because of the complexity of state laws, we interviewed state regulators responsible for reviews of policy forms and rates, actuaries, attorneys, deputy commissioners in charge of the health divisions and consumer services offices, and other state insurance department staff members.
4. M. Kofman, Group Purchasing Arrangements: Issues for States, Issue Brief 4, no. 3 (Washington: AcademyHealth, April 2003).
5. See also S.H. Long and M.S. Marquis, "Pooled Purchasing: Who Are the Players?" Health Affairs 18, no. 4 (1999): 105-111;
6. and R.E. Curtis, E. Neuschler, and R. Forland, "Consumer-Choice Purchasing Pools: Past Tense, Future Perfect?" Health Affairs 20, no. 1 (2001): 164-168.
7. There are also associations for people with similar personal interests, including hobbies.
8. States generally do not restrict membership. An association may have multiple levels of membership, such as regular and affiliate, similar to what federal proposals would allow.
9. M. Kofman et al., "Association Health Insurance: Is It Time to Regulate This Product?" Journal of Insurance Regulation 24, no. 1 (2005): 31-45.
10. Proponents of federal AHP bills argue that eliminating state insurance requirements would allow large associations to negotiate better rates for members. Because of market complexities, even with an exemption from state law, much better rates for associations are unlikely. Insurance premiums reflect use of medical care. An AHP's rates could be better if its members are low users of medical care. Independent analysts attribute lower AHP premiums to risk selection. See Congressional Budget Office, "H.R. 660: Small Business Health Fairness Act of 2003 (as passed by the House on June 19, 2003)," 11 July 2003, http://www.cbo.gov/showdoc.cfm?index=4413&sequence=0 (accessed 22 June 2006). Furthermore, unlike a large employer, an AHP is a voluntary, self-selected group whose members can enroll and disenroll from the health plan at any time. The initial rates for an AHP will reflect this churning and potential adverse selection. For self-insured AHPs, rates are unlikely to be better because of fixed functions such as administrative costs. It is also unlikely that AHPs can negotiate better rates than large national insurers have with providers. For these and other reasons, in the insurance context, large does not always equate with negotiating power to obtain better rates and benefits.
11. For additional information about group-purchasing arrangements, see S.H. Long and M.S. Marquis, "Have Small-Group Health Insurance Purchasing Alliances Increased Coverage?" Health Affairs 20, no. 1 (2001): 154-163;
12. J.M. Yegian et al., "The Health Insurance Plan of California: The First Five Years," Health Affairs 19, no. 5 (2000): 158-165;
13. M.A. Hall, E.K. Wicks, and J.S. Lawlor, "Health Marts, HIPCs, MEWAs, and AHPs: A Guide for the Perplexed," Health Affairs 20, no. 1 (2001): 142-153;
14. U.S. Government Accountability Office, Private Health Insurance: Cooperatives Offer Small Employers Plan Choice and Market Prices, Pub. no.GAO/HEHS-00-49 (Washington: GAO, 2000);
15. and CBO, Increasing Small-Firm Health Insurance Coverage through Association Health Plans and Healthmarts, January 2000, http://www.cbo.gov/ showdoc.cfm?index=1815&sequence=0 (accessed 22 June 2006).
16. For additional information about the potential impact of federal AHP legislation, see CONSAD Research Corporation, The Projected Impacts of the Expanded Portability and Health Insurance Coverage Act on Health Insurance Coverage, 10 July 1998, http://www.consad.com/reports/healthinsport.pdf (accessed 22 June 2006);
17. R.C. Chu and G.R. Trapnell, "Study of the Administrative Costs and Actuarial Values of Small Health Plans" (Summary), January 2003, http://www.sba.gov/advo/research/rs224.pdf (accessed 31 July 2006);
18. and B. Fritchen and K. Bender, Impact of Association Health Plan Legislation on Premiums and Coverage for Small Employers (Washington: Mercer Risk, Finance, and Insurance Consulting, June 2003).
19. Long and Marquis, "Pooled Purchasing."
20. See Kofman, "Association Health Insurance."
21. In a few states, laws governing small-group and individual coverage apply regardless of the policyholder.
22. Marketing materials might lead consumers to believe that they are buying coverage with the same protections that job-based coverage has (guaranteed access to an employer's health plan, nondiscrimination protections, preexisting condition exclusion limits, and premium restrictions). In most states, a consumer can be individually underwritten, and unlike with employer coverage, a person's past and current medical conditionsmay be considered before the person is accepted for insurance, existing or past medical conditions may not be covered under the policy at all, and the premium is likely to be based on the person's risk factors. For example, see American National Life Insurance Company of Texas, "The American Champion Plus Select" (description of Group Policy no. NCAA003 issued to the NCAA, ANTEX's Policy Form Series ANL-2001P, available from the authors).
23. Also, see Colorado Division of Insurance, Market Conduct Examination Report: Mid-West National Life Insurance Company of Tennessee (Denver: Colorado Division of Insurance, 31 December 1998), 7. According to Colorado's regulators, the insurer's "association group accident and health division produces individually underwritten major medical products."
24. States include AZ, CO, FL, GA, KS, MT, NH, NM, OK, OR, PA, SD, and WV. Georgetown University Health Policy Institute, "Survey of State Insurance Regulators: Regulation of Associations 2003-2004" (Washington: Georgetown University HPI, unpublished). In practice, higher requirements might not benefit intended consumers because a state lacks the types of reforms necessary to allow people with medical needs to enroll in association coverage. Consumer protections such as guaranteed issue, rate restrictions, portability, and coverage design work together.
25. Many states with small-group laws called "rate bands" (limits on use of health factors in premiums) permit insurers to consider their association business a separate rating class for purposes of applying state rating restrictions. The difference in base rates between association and small-group coverage must be within a specified permissible range. The rate differences for small businesses within an association would be limited the sameway as they are outside the association. But theremay be different rates for similar coverage, depending on whether the policy is bought through an association. See Kofman and Pollitz, "Health Insurance Regulation by States and the Federal Government."
26. See Health Markets, "UICI Announces Settlement Reached in Association Group Litigation," Press Release, 14 May 2004, http://www.healthmarkets.com/home/media/press_releases/2004_Press_Releases/ 2004_05_14_Settlement_Reached.html (accessed 31 July 2006).
27. According to market-conduct exams and a review of captive association policies, nondisclosure or improper disclosure of covered mandates is a problem. Colorado Division of Insurance, Market Conduct Examination Report: John Alden Life Insurance Company (Denver: Division of Insurance, 31 December 1999), 62.
28. MEGA Life and Health Insurance company, a subsidiary of UICI, was found to be in violation of Colorado's insurance laws for failure to file policy forms, to disclose to enrollees that the policy covers certain benefits, to disclose out-of-pocket expenses accurately, to comply with portability requirements, and to disclose accurate information about the renewability of policies and the availability of guaranteed-issue policies. Colorado Division of Insurance, Market Conduct Examination Report: The MEGA Life and Health Insurance Company (Denver: Division of Insurance, 31 December 2001), 12-14.
29. States with less stringent or no rate-filing requirements for in-state policies include AZ, AR, CA, CT, FL, GA, ID, IN, IA, MI, NH, OH, OR, PA, SC, SD, TX, VA, and WI. States with less stringent or no rate-filing requirements for national policies include AZ, AR, CA, CT, FL, GA, HI, ID, IA, KY, ME, MD, MI, MN, NE, NH, NV, OH, OR, PA, SC, SD, TN, TX, VA, and WI. States with less stringent or no form-filing requirements for in-state policies include AZ, MN, and WV. States with less stringent or no form-filing requirements fornationalpolicies include AL, AZ, DE, FL, HI, IL, IA, ME, MD, MN, MO, NE, NV, OR, PA, TN, VA, WV, and WI. For both rate-filing and form-filing requirements, Minnesota and Wisconsin apply requirements that are applicable to in-state associations when at least 25 percent of the members of a national association are residents of the state. Vermont applies standards when twenty-six certificate holders are in state. Georgetown University Health Policy Institute, "Survey of State Insurance Regulators."
30. Kofman, "Association Health Insurance"; Addison v. American Medical Security, Case no. CL 00-01445 AB, at 12 (Fla. Cir. Ct. 15th Cir., 22 May 2002) (Final Judgment on Liability);
31. Commissioners and Directors of Insurance of the States of Indiana, Iowa, Kentucky, Minnesota, Missouri, Ohio, North Dakota, South Dakota, and Wisconsin, Market Conduct Examination Report of Golden Rule Insurance Company (State Departments of Insurance, 13 June 2002), 11;
32. State of Washington, Office of Insurance Commissioner, Report of Target Market Conduct Examination of American National Insurance Company (Olympia: Washington Office of Insurance Commissioner, 20 December 1999), 4;
33. Maine Bureau of Insurance, In re: PFL Life Insurance Company, Docket no. MCINS 97-19 (Augusta: Maine Bureau of Insurance, 2001), 3;
34. C. Terhune, "Coverage Limits: Nonprofit Groups That Tout Insurance Have Hidden Links: Associations That Offer Deals Are Often Set Up by Insurer," Wall Street Journal, 21 November 2002;
35. and C. Terhune, "Insurer's Tactic: If You Get Sick the Premium Rises," Wall Street Journal, 9 April 2002.
36. Authors' discussion with Paul C. Latchford, vice president, Law and Governmental Affairs, AEGON, Direct Marketing Services Inc., 15 October 2003.
37. These states are AK, CA, CO, FL, GA, ID, IN, IA, KY, LA, ME, MI, MN, MO, MT, NE, NH, NJ, NM, NC, OH, OK, OR, SC, SD, TN, TX, and WA. See M. Kofman and J. Libster, "Turbulent Past, Uncertain Future: Is It Time to Reevaluate Regulation of Self-Insured Multiple Employer Arrangements?" Journal of Insurance Regulation 23, no. 3 (2005): 17-33.
38. Sunkist Growers Plan (2001); Indiana Construction Industry Trust (2002); NJ Coalition of Automotive Retailers (2002); and NJ Licensed Beverage Association (2003). See also M. Kofman, K. Lucia, and E. Bangit, MEWAs: The Threat of Plan Insolvency and Other Challenges (New York: Commonwealth Fund, March 2004).
39. M. Kofman, K. Lucia, and E. Bangit, Proliferation of Phony Health Insurance: States and the Federal Government Respond (Washington: BNA Plus, 2003).
40. See M. Kofman, Loss of State Oversight Means Regulatory Vacuum and More Fraud (Washington: Georgetown University Health Policy Institute, Summer 2005).
41. GAO, Employee Benefits: States Need Labor's Help Regulating Multiple Employer Welfare Arrangements, Pub. no. GAO/HRD-92-40 (Washington: GAO, 1992).
42. GAO, Private Health Insurance: Employers and Individuals Are Vulnerable to Unauthorized or Bogus Entities Selling Coverage, Pub. no. GAO-04-312 (Washington: GAO, 2004).
43. Ibid.
44. 29 CFR 2520 (9 April 2003), 17497.
45. GAO, Private Health Insurance.
46. State v. Zanfei, No. 2003-CF-4414 (Fla. Orange County Ct. 9th Cir. June 2005); State v. Crouse, No. 2003-CF-4414 (Fla. Orange County Ct. 9th Cir. June 2005);
47. and U.S. Department of Justice, "Operator of Employers Mutual Convicted of Fraud for Operating Bogus Health Insurance Provider," Press Release, 16 November 2005, http://www.usdoj.gov/usao/cac/pr2005/156.html (accessed 31 July 2006).
48. HIPAA added a new section [101(g)] to ERISA Title 1.
49. M. Kofman, E. Bangit, and K. Lucia, "Multiple Employer Arrangements: Another Piece of a Puzzle, Analysis of M-1 Filings," Journal of Insurance Regulation 23, no. 1 (2004): 63-88, at 77.
50. See Kofman and Libster, "Turbulent Past, Uncertain Future." The federal government posts Form M-1 on the U.S. Department of Labor Web site (http://askebsa.dol.gov/epds) but does not provide in-depth analysis by state; MEWAs are not required to report the total number of people covered (just the number of covered employees).
51. For state-specific analysis, see Changes in Health Care Financing and Organization (HCFO), "MEWA Database: Search Detailed State Information," http://www.hcfo.net/mewa (accessed 31 July 2006).
52. "Reporting by Multiple Employer Welfare Arrangements," Federal Register 68, no. 68 (9 April 2003): 17495, 17498.
53. Kofman et al., "Multiple Employer Arrangements," 84-85.