Association health plans that sell limited-coverage health insurance are back, under an executive order signed by President Donald Trump Thursday. Trump — as well as Kentucky’s two U.S. senators — touted the order as one that will allow Americans to access more affordable health care policies, but critics say the executive order could create more problems in the U.S. health care system.
Association health plans are formed by groups of people, small businesses or trade groups. They can form across state lines, and proponents say the formation of these groups would give people power to negotiate better insurance prices.
But before the Affordable Care Act, these plans typically offered skimpy benefits and weren’t subject to state regulations. After the ACA was passed in 2010, it effectively killed these association health plans by requiring insurers to offer certain essential health benefits. Those included eliminating daily and annual caps on what the insurance would pay — caps which were often included in association plans.
These plans have long been touted by Kentucky Sen. Rand Paul, who over the past several months has gone against most of his Republican colleagues in opposing numerous measures to repeal and replace the Affordable Care Act. He is against upholding the ACA and keeping funding for the program, and he said association plans will give people an additional option.
“We think this holds great potential. There’s 11 million people in the individual market who are terrified of what they have,” Paul said in a news conference Thursday. “We want to let them join a group, and be able to bid prices down.”
And now that association plans are back, some are worried healthy people will flock to them in search of a better deal.
Limited Benefits, Unbalanced Risk Pools
Before the Affordable Care Act, association health plans could duck state insurance regulations, which were often more stringent than federal ones. And they did.
Tony Stuart is a California-based lawyer who won many cases on behalf of consumers who racked up big medical debt because these association health plans would not pay for many claims.
“[Association health plans are] a combination of limited benefit plans that don’t measure up to real health insurance. People get fooled,” Stuart said. “They think they’re buying health insurance, and they’re really not.”
Before the ACA passed, insurance with these plans was relatively cheap. And that was because the benefits were very skimpy, according to Stuart.
“In these particular companies’ policies, the chemotherapy coverage would cover $1,000 a day, and no more,” Stuart said. “Which was ridiculous because chemotherapy can cost $30,000 in a single day.”
Besides potentially causing problems for people who have the plans, association plans could create issues for people who stick with the marketplace created by the Affordable Care Act.
Timothy Jost is a professor at the Washington and Lee University School of Law who specializes in health care. He said the ACA was specifically created to include both healthy and sick people to balance out the risk. But historically, association health plans often excluded sick people.
“They were happy to insure healthy people, but they had control over membership and discourage unhealthy people from applying or accepting them at all,” Jost said.
Jost said this could happen by creating membership requirements, like belonging to a certain gym.
And if the only people on the federal government’s Healthcare.gov marketplace are sick people who don’t qualify for association plans, this could stress the system with high-dollar medical claims.
President Trump said three government agencies will create regulations to set standards for these plans. The details haven’t been released yet, so there is the possibility that some of the ACA protections will remain in place. But that process will likely take months as the government will have to go through a comment period.