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AHPs offering robust benefits, projected to have little to no effect on insurance markets

The North Carolina Senate recently voted to approve SB 86, the Small Business Health Care Act. This bill would align North Carolina law with federal law to give small businesses and self-proprietors more power to band together to purchase health insurance as a large group through an association, commonly referred to as association health plans (AHP).

These plans are often much more affordable compared to similar plans that would be purchased by a small business or individual on the Obamacare exchanges. As I have previously discussed, small businesses, self-employed workers, and sole-proprietors would benefit tremendously from being able to access this type of health benefit arrangement.

Critics of these plans say they amount to junk insurance and won’t offer close to the benefits that Obamacare does. However, these critics also underestimate the power of the market. Previously on the blog, I have discussed the fact that the majority of these plans are offering comparable benefits for much less than the plans on the Obamacare exchanges.

When an association offers health benefits to their members, a powerful incentive exists which compels the organization to provide their members with the best possible coverage for the lowest price.

Critics of these plans also claim that take-up of AHPs would destabilize the insurance markets. However, a recent op-ed in The Hill  authored by Christopher E. Condeluci, former Counsel to the Senate Finance committee, discussed why those concerns are unlikely to come true:

In a CBO report released in January, CBO concluded that – after factoring in the availability of premium tax credits and behavioral changes among individuals and employers – AHPs will not “spur a noticeable decline in insurance coverage.” Actually, CBO estimated that 400,000 people will be employed by small employers who will decide to offer health coverage for the first time, meaning AHPs will help people shift from being uninsured to insured. That’s a coverage gain.

CBO explains that the availability of AHPs “will result in an increase of roughly 3% for premiums among the plans offered by the remaining employers [in the small group market].”  But CBO also says that “because premiums for AHPs will be lower than premiums small employers are currently paying, premiums for the small group market as a whole are projected to decline.” This market-wide reduction is likely due to small group market insurance carriers competing with AHPs, requiring these carriers to lower their premiums. On net, the increased competition will likely wipe-out the projected 3 percent premium increase in some markets.

When it comes to the individual market, CBO expects that out of 6.9 million individuals who are currently receiving a premium tax credit through an ACA Exchange, only 150,000 of these planholders will shift to an AHP. And, out of 5.2 million individuals in the “unsubsidized” individual market, CBO indicates that only 100,000 planholders will shift to an AHP. Objectively speaking, a Medicare-Buy-In program will likely cause a greater reduction in enrollment in the ACA’s subsidized and unsubsidized individual market.

As SB 86 moves towards the NC house, I encourage all stakeholders to work together to pass a piece of legislation that is market-driven and also provides consumer-friendly, low-cost healthcare coverage options. To give North Carolinians increased access to AHPs will significantly benefit the small business owner and offer more healthcare choices for those who may be uninsured or struggling to afford their current health plan.

 

Jordan Roberts / Health Policy Analyst

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. He analyzes state and national health policy issues with an eye toward removing governm...

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