March 31, 2020
Expanding Association Health Plans A Mistake For Virginia, Would Undermine Progress
Affordable, comprehensive health care is critical for the health and well-being of our communities. Yet the Affordable Care Act (ACA) continues to be under threat at the federal level, as the Trump Administration has levied several rules around association health plans (AHPs) and short-term limited-duration (STLD) health plans that undermine the individual marketplace. Virginia is moving forward with efforts to stabilize the individual marketplace by creating a state-based exchange and possibly, a reinsurance program. But these efforts could be stymied by the expansion of association health plans that benefit a carved out section of Virginians at the expense of the many – a move that the governor should reconsider.
AHPs and STLD plans often offer inadequate coverage that shifts costs to consumers, and they weaken the marketplace by drawing healthier and younger people away from marketplace coverage. As a result, the group of people often left in the marketplace (or risk pool) are older adults and individuals with high medical needs who are then burdened with increased premiums for the comprehensive coverage they rely on through the ACA marketplace.
Virginia lawmakers have voted to place limits on the sale of STLD health plans, but simultaneously passed legislation to loosen regulations on who can offer association health plans. Three bills (HB 795/SB 235 & SB 861) passed the General Assembly during the 2020 legislative session and if signed into law, would expand access to AHPs in Virginia.
The passing of this legislation is puzzling given that Virginia joined 10 states and the District of Columbia in suing the federal government over the U.S. Department of Labor’s (DOL) rule that broadens enrollment for AHPs. The lawsuit is based on the premise that the new DOL rule is an attempt to weaken the Affordable Care Act and will result in cumbersome regulatory burdens on the state. In late March 2019, a federal judge ruled in favor of Virginia and the other states challenging the DOL guidance. The federal government has appealed the decision and the lawsuit is currently awaiting a decision in federal appeals court.
Implementation of HB 795/SB 235 is essentially another method to implement the DOL rule in Virginia, in the event the rule is invalidated in federal court. The legislation instructs Virginia’s Bureau of Insurance (BOI) to apply for a Section 1332 state innovation waiver under the Affordable Care Act to implement its changes. However, BOI has noted that it is their understanding that a Section 1332 waiver cannot be used to implement the changes the legislation seeks.
Adding another challenge to marketplace stability, language in SB 861 allows associations to form a benefit consortium to offer Multiple Employer Welfare Arrangements (MEWAs) to its members. MEWAs offered through SB 861 will be a completely new health benefit product that will not be defined as insurance and, as such, will not be required to comply with many current Virginia insurance regulations. Bill language instructs MEWAs to comply with some ACA protections, such as offering essential health benefits and barring denials based on a pre-existing condition. However, they can put caps and limits on services and will still lack the full, robust suite of protections included in ACA compliant plans, putting people who are enrolled in MEWAs at risk.
Expanding access to AHPs is expected to increase premiums by approximately 3.5% for those who purchase their health coverage on the ACA individual marketplace. This rise in estimated costs would be due to the fact that healthier, younger individuals would likely gravitate to association health plans which often offer lower premium rates due to offering less generous benefits. An older individual or someone with high medical needs may choose not to enroll in an AHP because they could receive less comprehensive coverage or pay more out of pocket than they would with a plan purchased on the ACA marketplace.
The legislation recently passed by the Virginia legislature would allow AHPs to charge groups of employees differently based on gender, age, previous claims data, and even zip code. Additionally, these plans do not have an established minimum medical loss ratio (MLR). A medical loss ratio – introduced by the ACA – requires insurers to spend a specific amount of collected premiums on health care services and quality improvement. The MLR for ACA large group plans is set at 85% and if an insurance company falls below this threshold they must reimburse the difference to those enrolled in their plans. This provision is critically important in protecting people from exorbitant premium costs and encouraging insurance companies to put coverage over profit. People will likely not receive such protections if they receive coverage through an AHP.
Although legislation has passed both the House and Senate, there is still opportunity for Virginia to reject the growth and expansion of these plans. Gov. Northam has until midnight April 11, 2020 to take an action on these bills. The governor should strongly consider vetoing HB 795/SB 235 and SB 861 in order to protect access to affordable and comprehensive health coverage for everyone in Virginia.