association health plans
Employee Benefits

Conflicting Messages

Ed Oleksiak
Ed Oleksiak
Sr. Vice President, Employee Benefits

As if the healthcare industry weren’t difficult enough to understand, now we’ve kicked off the new year with a bit more confusion thrown our way.

As a result of President Trump’s 2017 executive order, the administration released new final regulations around Association Health Plans (AHPs) and new proposed regulations for Health Reimbursement Arrangements (HRAs). These two healthcare alternatives, along with short-term health plans, are intended to provide alternatives to healthcare available under the Affordable Care Act.

Let’s get into the nitty gritty a bit. The AHP regulations were created to let smaller groups ban together to gain economies of scale. The theory was that these groups would have purchasing power in the market place, thus lowering the overall cost of healthcare. Here’s the deal, though — most AHPs won’t be large enough to negotiate with providers. There may be some economies on the administrative side, but that only amounts to less than 15 percent of the total cost.

I find it ironic that as AHPs were created to bring economies of scale, the new proposed HRA regulations go in the opposite direction. One of the features of the proposed regulations is to allow an employer to contribute money to an HRA for their employees who would then be able to go out and buy an individual policy. The exact opposite of economies of scale. Confused yet? Join the crowd!

Unfortunately, while these two approaches might provide economies of scale or might even allow the consumer to buy insurance that better fits their needs, neither approach addresses that fact that with only 12 percent of our population not having a metabolic risk factor, costs will continue to rise. Additionally, employers will still need to compete in a tight labor market and have as productive a work force as possible.

My best advice for employers heading into the new year is this —focus on results-oriented health improvement programs that can impact 85 percent of the cost rather than spending energy on the newest cost shuffling ideas within 15 percent of administrative costs.

Here’s to starting the new year with confusion!

Explore more from Holmes Murphy