association health plan
Employee Benefits

Are Association Health Plans the Answer?

Den Bishop
Den Bishop
Senior Advisor

“Association Health Plans are about more choice, more access, and more coverage.” —  Secretary of Labor Alexander Acosta. 

That quote from Secretary Acosta is used as the opening on the United States Department of Labor website announcing the final rules for Association Health Plans released on June 19.

If choice, access, and coverage are what’s in question, then the answer is “yes…this will work.” However, Secretary Acosta doesn’t say that lower cost will be an outcome. This is an important omission, but it’s vital to remain truthful.

If you’re unsure of what Association Health Plans are, simply put, they allow individuals or groups to band together to purchase health insurance. It seems that those in the government are often convinced that bigger is better in health insurance. Yes, bigger is more predictable, but cost is driven by risk within the covered population. For example: An older, sicker population will have predictably higher cost.

Here’s my thought on the situation — I would contend that in health insurance, better is better. In other words, better risk leads to lower cost. The size of the group only impacts predictability of the cost.

Because of the government and uninformed media obsession with size, most Americans don’t understand the cost of health insurance for small employers is actually lower than the cost for large employers. According to the Kaiser Family Foundation 2017 Employer Health Benefits Survey, small employers with less than 25 employees paid 18.3 percent less for family health insurance than large employers with more than 5,000 employees. I’ve included the chart below, so you can see the exact statistics.

The Association Health Plan rules maintain the same pre-existing condition elimination and other underwriting restrictions that were introduced in the Affordable Care Act.

Here’s the bottom line: Associations cannot medically underwrite or discriminate against anyone because of health risk. They will not magically lower cost. However, while the official Harry Potter Fan Club might be able to create a great Association Health Plan…it could fall to the fate of Voldemort if too many older Muggles have joined the group.


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