With the publication of the final rules regarding the establishment of association health plans, many believe we have given new life to an old concept of employers banding together to purchase goods and services in an effort to use a scale-up approach to reduce expenses.
Unfortunately, with this strategy comes with the meeting of several roads; each having very rocky terrain.
On the one hand, the appeal of industries banding together makes a lot of sense. For example, the tech industry typically attracts young healthy employees who traditionally embrace healthy lifestyles and who require little health care services to maintain healthy lives (a perfect pool for an insurer).
On the other hand, pools like this would extract the healthiest individuals from other pools; leading to the worst disaster for insurance companies, what we call adverse selection. This adverse selection is the likelihood that those most likely to join are those most likely to consume – and in significant amounts.
The ACA, for all its efforts, attempted to build the largest pools and level the playing field for all by requiring virtually all Americans to purchase and maintain health insurance – creating the best chance for Insurers to find a way to balance claims and rising medical care and pharmacy costs within a private healthcare system.
Trump’s new path allows associations to not only potentially offer, but further differentiate, the plan, by allowing significant reductions or exclusions to coverage. This creates the idea/illusion that there is a simple format to buy coverage that doesn’t cover virtually everything (we call these “essential” health benefits), thus potentially paving the way for the Pool to charge lower premiums.
California legislators aren’t thinking this way – there is a strong sense the state of California likes the status quo, the pools of individuals that allow for guaranteed acceptance. The concept of allowing insurers to offer plans that are less generous or that cover fewer conditions seems to make legislators uneasy.
And so, the jury is still out as to whether states will embrace association-based health plans and whether insurance companies will consider sponsoring these pools.