There is much confusion as to just what effect the President’s executive order on healthcare will have on business. Much is being said about the potential effects on individuals but the media isn’t saying much about the impact on business.
Some of you may be cheering over the President’s order, and some of you may believe we are like Thelma and Louise driving over the cliff.
Last Thursday morning the President signed an executive order that could remove requirements for basic benefits that are a part of the Affordable Care Act. He also proposes to give small businesses more health insurance options with the use of “association plans” to negotiate better deals for health insurance.
Business groups hailed the move saying it will lower costs, increase competition and provide more options. Others believe it is potentially devastating. What does this mean for your business?
Here’s the good news. Your insurance costs could go down if you decide to buy an association health plan. That sounds like a good financial decision, a great idea, it’s about time for lower health care costs, isn’t it? But are you ready for the skimpier plans with fewer benefits and higher deductibles that will accompany the lower costs? These plans may not have prescription coverage, maternity care or hospital care included. They could be offered by nationwide associations and be sold across state lines. While much depends on how the regulations are written the executive order potentially allows plans to skirt health care reform regulations by eliminating basic health benefits and creating plans with less coverage.
Association health plans (“AHPs”) are not a new idea. Before health care reform, national associations could pick and choose which states insurance rules they wanted to follow and use those rules to guide the plans they offered nationwide. The bakers association, for example, could choose to follow the rules of the Alabama insurance market (which mandates relatively few benefits) for all of its bakeries in New York or California, states with many consumer protections and mandates that would be left uncovered.
The result was health insurance that was a better deal and could provide a practical solution for businesses with young and healthy employees, who are likely to prefer skimpier plans. Businesses with older employees with greater medical needs could be excluded from the association. Alternatively, they could lose their plans as a result of their insurance company exiting the market due to lack of profitability or insolvency caused by the high costs of those with greater medical needs. With relaxed federal regulations proposed by the administration, state insurance regulators would have to make sure insurers have enough money to pay their members medical bills. Previously when rules were relaxed, association plans were rife with fraud. Some analysts anticipate that established insurers will stay away from offering association plans as they have done in the past.
Sabrina Corlette, a professor with the Center on Health Insurance Reforms at Georgetown University who is also the consumer representative to the National Association of Insurance Commissioners said “AHPs do have a poor track record, both in terms of insolvency and also, unfortunately, of fraud,” Between 2001 and 2003 four long-standing self-insured association health plans became insolvent, leaving $48 million in medical claims unpaid and 66,000 people and small businesses without insurance. Experts in favor of association plans argue that association health plans are governed by licensing requirements. However, with weakened federal regulations and few resources available to enforce them the likelihood of their success and sustainability is questionable.