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Association Health Plans Could Pose Risk for Oregon

The plans, promoted by the Trump administration, could negatively affect women and older employees, while benefiting younger men.
Insurers worry that associations with lots of women would pay higher rates under new health plans. | WIKIMEDIA COMMONS
July 2, 2018


The Trump administration is pushing a set of health plans that could weaken existing markets and lead to more expensive care for some Oregonians, particularly women and adults nearing retirement age.


At the same time, these health plans, called “association health plans,” could offer greater flexibility for small businesses to band together to design health benefits for their employees at a lower cost than what insurance sells for on Oregon’s small-group market.


The plans would not have to be as comprehensive as plans governed by the Affordable Care Act, putting employees at risk for covering what the plans leave out.


“These associations will be treated as large employers, thus will not be required to cover essential health benefits,” said Brad Hilliard, the spokesman for the Division of Financial Regulation at the Oregon Department of Consumer & Business Services.


The plans will be subject to certain provisions of the Affordable Care Act, however, including the requirement to provide preventive services. They also must still cover mental health benefits and could not limit the amount of medical expenses they’ll cover.


The proliferation of such plans could distort the regular small group market and lead to higher costs for employers and consumer in Oregon’s small group and individual health insurance markets.


“I don’t think that we have anything in place to deal with the problem yet,” said Jesse O’Brien, a health policy advocate at the Oregon State Public Interest Research Group, a consumer advocacy organization. “We need to do more.”


It’s not yet known, however, how popular these plans will be. Brian Turmail, a spokesman for the Associated General Contractors, said it was too early to tell whether his organization, including its Oregon affiliate, would be interested in offering these health plans to contractors and their employees.


Association health plans have existed for years, but tight restrictions made them unpopular. The Trump administration is loosening regulations to open them up to more employers to encourage their spread as part of its push to undermine the Affordable Care Act.


This is how they would work: An association of truckers, for example, would get together with an insurer and create a plan for members.


Business groups and trade organizations would negotiate coverage packages with health insurers just as large employers do now. The new rules would allow the plans to operate across state lines so that national associations, for example, could devise a single plan for their members in various states.


Employees in businesses or associations that offer the plans could either accept them or they could buy their own subsidized health insurance on the exchange, if the plans do not meet the standards of the Affordable Care Act.


Men and women with the same employer would face the same rates but plans covering companies dominated by men or women might get different insurance offerings depending on the predominant gender of their employees.


Officials at Blue Cross Blue Shield Association, the national trade organization that includes local insurer Regence Blue Cross Blue Shield of Oregon, have said that associations with lots of women would pay higher rates. In comments filed with the Department of Labor, the association said that plans for associations with lots of women in their 30s could see rates 30 percent or higher than those sold on the existing small employer market. Association plans covering a surplus of men that age, such as construction workers, could be 40 percent lower than the current market.


Health insurers in the current small group market are not allowed to charge businesses more based on the makeup of their employees, and instead everyone pays the same rates, a process called community rating.


Employment-age women are costlier to insure than men because insurance companies must pay out claims for pregnancy, contraception and more frequent physician visits. Young men use very few medical services by comparison. Before the Affordable Care Act, insurance companies routinely charged women more than men in the individual health market. The ACA bars gender discrimination in the individual and small group markets, but not the large group market, which includes the small employers that seek coverage in these association health plans.


The plans could also charge higher rates for businesses with many older employees, something which is not allowed in Oregon’s regular small employer market.


An upsurge in these national association health plans could spell trouble for Oregon’s local nonprofit insurance companies. Employers opting for these association health plans would likely both leave Oregon-based insurers and leave the state’s small group market, shrinking the risk pool as well as leaving it dominated by employers whose employees are more expensive to insure.


It’s unlikely that insurers might try to set up these plans in Oregon, which has relatively robust consumer protections and regulations, making it unattractive for big for-profit health insurance companies like Aetna, Cigna or UnitedHealthCare, said Rick Skayhan, an insurance broker at Leonard Adams Insurance in Portland.


Instead, Skayhan said that insurers would headquarter the plans in low-regulation states like Texas or Idaho. A national association would then offer such a plan to members across state lines, including Oregon.


If male-dominated industries left Oregon’s small employer market, leaving mostly female-dominated industries, that would distort the market and drive up rates for employers who stick with the Affordable Care Act structure.


The individual market would also become more skewed toward less healthy people, since the employees who are most likely to opt out of a skimpy association health plan would be those who need the comprehensive plans sold on the exchange.


The revised association health plan rules take effect in September. Oregon’s oversight of the large group market, which will include the association health plans, is limited and state regulators are debating whether to enact additional regulations for these association health plans.


O’Brien, the consumer advocate, said the federal government wrote the administrative rules for the association health plans in a way that allows Oregon to enforce additional consumer protections, even when the plans are originated in another state.


Reach Chris Gray at [email protected].