Individual or small employers could have new health insurance options
Wisconsin Manufacturers & Commerce plans to offer health plans solely for its members. Wisconsin Property Taxpayers Inc. may do the same. So, too, may other organizations.
A burst of so-called association health plans could hit the market as early as next year as a result of new rules issued by the Trump administration that begin to go into effect this month.
Association health plans would give small businesses and people who are sole-proprietors or self-employed additional options for health insurance. And in some cases, those options could be less expensive — though how much less remains unclear.
“It’s going to be a niche,” said J.P. Wieske, the state’s deputy commissioner of insurance. “But it’s going to be an important niche for certain groups.”
The health plans could hold particular appeal to people who are self-employed or sole proprietors and who aren’t eligible for federal subsidies for health insurance — those with incomes above $48,560 for one person and $100,400 for a family of four this year.
They have seen the cost of health insurance soar under the Affordable Care Act.
The sharp increases are due to flaws in the law’s design, moves by Congress during the Obama administration and decisions by the Trump administration.
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The new rules for association health plans are complex but would enable organizations to sell health plans that don’t comply with some of the restrictions imposed on health insurers by the Affordable Care Act.
They include requirements that health plans offer certain benefits, that bar insurers from charging young women higher premiums than young men and that cap how much more older people can be charged than younger people.
The new rules will enable associations to sell health plans that cost less in some cases.
But the health plans also may cost less because they provide less coverage. And they then may be more expensive than other health plans for older people and some small businesses.
Health insurers also could be quite selective in the associations with which they want to partner.
Scott Weltz, a principal and consulting actuary with Milliman, a consulting firm, expects a lot of small employers to be interested in association health plans.
Some will be able to get better rates, he said, though the rates could vary by industry.
“The real appeal comes with the younger groups,” Weltz said.
Wisconsin Property Taxpayers, which is working with an undisclosed Wisconsin insurer, was not ready to provide details on what it could offer its members.
But John Jacobson, director of government and member relations for the organization, said, “We are excited about its potential.”
Wisconsin Property Taxpayers has about 18,000 members, a third or more of them family farms. And Jacobson said its members, which also include many small businesses, have encouraged the association to look into selling health plans.
“At the end of the day, this is about helping our members,” he said, “and at the very least trying to provide them with an option.”
The association health plans will not be able to deny coverage to people with health conditions or charge them higher premiums. But insurance companies can set prices based on the overall health of the people who buy health insurance through the association.
“That is a really important key distinction,” said Marty Anderson, chief marketing officer of Security Health Plan, an affiliate of Marshfield Clinic.
Some of the potential savings, he said, will be realized only if the group is healthier than average.
It gets more complicated.
Associations can put their members in different industry groups and charge each different premiums.
For example, digital marketing firms, in which the average age is 30, could pay much lower rates than tool-and-die shops, in which the average age is 50.
Wieske, the deputy commissioner of insurance, questions whether associations will do that.
Their members may oppose it, he said, and administering it would be complex.
But association health plans will have more flexibility in their design, such as deductibles and benefits, including coverage for prescription drugs.
Their members also would belong to a larger “pool,” which could give insurers more confidence in projecting potential medical costs and result in lower rates.
“The stuff isn’t magic,” Wieske said, “but it is going to work for some folks.”
One potential limit is roughly half the small employer market — businesses and organizations that employ fewer than 50 people — in Wisconsin are in so-called transitional plans that were sold before the Affordable Care Act and that are exempt from its regulations.
Interest nonetheless is strong.
“Nobody wants to pay what they are paying today,” said Jon Rauser, president of the Rauser Agency, now part of Robertson Ryan & Associates.
But Rauser expects insurers to avoid partnering with certain associations. And though the association health plans could save money by carving out certain benefits, such as expensive drugs, he questions whether the savings will be significant.
Wisconsin Manufacturers & Commerce is more optimistic.
It plans to offer a plan or several plans to its members by the start of next year, said Kurt Bauer, president and chief executive of WMC.
Flexibility in how the plans are designed and what must be covered is part of the appeal.
“You are not going to be paying for something you don’t need,” Bauer said.
But Bauer also acknowledged that the plans could provide less coverage.
That may not appeal to some associations.
The Wisconsin Medical Society had an association health plan before the Affordable Care Act, said Linda Syth, chief executive officer of Wisconsin Medical Society Holdings Corp., an insurance broker for its members. And last year it again began selling health insurance to physician practices.
It was barred, however, from selling health insurance to individuals.
The new rules change that. But Syth said the organization doesn’t plan to offer an association health plan.
“At this point, there are too many unknowns,” she said.
She contends that the potential savings would come largely from providing fewer benefits.
“We believe in behavioral health,” Syth said. “We believe in prenatal care. We believe in all those things.”
She also is skeptical that associations could have plans in place by Jan. 1.
“There’s a lot to do, because I’ve done it,” Syth said. “It’s not easy.”
Another challenge is determining how to price the insurance for new groups.
“It’s very difficult to lock down the risk,” said Anderson, of Security Health.
Erin Long, a product manager for Security Health, said association health plans are drawing a lot of attention, but she questions whether the plans will be an attractive option.
“Take a look at the fine print and people may second guess whether this is the best option for them,” Long said.
To what degree association health plans will affect the market for insurance sold directly to individuals and families is a source of debate.
At a minimum, some people who are healthy are expected to move to health plans sold by association health plans — and those people are needed to help offset the cost of covering sicker people in the health plans sold on the marketplaces set up under the Affordable Care Act.
Kevin Lucia, a research professor and project director at Georgetown University’s Health Policy Institute, believes that it will affect the exchange market.
But almost everyone who now buys health plans on the marketplaces set up under the Affordable Care Act — more than 90 percent in Wisconsin — receives federal subsidies that cap the cost of insurance to a percent of their household income.
How states are responding to the new rules varies.
Nebraska and North Dakota are welcoming the association plans, for instance, while Massachusetts will require them to comply with existing rules on insurance sold to individuals and small employers, according to a brief by researchers at Georgetown University done for the Commonwealth Fund.
In addition, 12 states are challenging the new rules in a lawsuit filed against the Trump administration.
But there clearly is interest in Wisconsin in association health plans — and more than than a few unknowns.
If nothing else, association health plans could give some small employers and individuals additional options when shopping for health insurance.
“We’ll see how it plays out over the next few years,” said Weltz, of Milliman.
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