Small business association health plans (AHPs) can be thought of as a pool of savings that can help people of all income levels, and businesses of any size, get access to health insurance. AHPs are not the health plans themselves, but a group of people that can ban together and make health care possible for each other.

By pooling together their resources, these association health plans can then provide access to health insurance that will cover their medical costs in case they get sick, in case of an emergency, or if they are in need of health insurance due to a chronic condition.

To help you better understand AHPs, we’ll cover the basics below and help you understand whether this may be the right solution for you and your employees. Keep reading or use the links below to find the answers to your questions.

What are association health plans?

Association health plans (AHPs) are not actual health insurance plans, but instead, this term refers to the ability for small groups–such as small businesses and sole proprietors–to secure healthcare coverage as one larger group. This functions similarly to traditional group health insurance.

Everyone from freelancers, to private contractors, and also small businesses with less than 50 employees can gather together to create an association health plan. Larger employers cannot participate in association health plans.

With AHPs, these smaller groups have more negotiating power. As such, they are typically able to get better pricing on healthcare coverage than they would on their own.

For the insurer, this is beneficial because they incur less risk when these groups band together. How is risk reduced with AHPs? Coverage costs are distributed across a larger group.

AHP plans can be fully insured or self-insured. Fully insured AHP plans are purchased from a state-regulated carrier. Self-insured plans are sponsored by the organization.

Are AHP prices flexible?

Association health plans for small business owners or freelancers can vary in price. For instance, younger, or more healthy employees, can ban together and pay for the same, affordable health insurance that provides minimal coverage. 

On the other hand, small business association health plans can also be used to cover more in-depth health insurance for people with chronic conditions. Both affordable and more expensive health insurance plans can therefore be covered with the help of an AHP.

With this flexibility, small business health benefits may be worth considering as they are influential in attracting and keeping a talented workforce. 

What qualifies as a small business association or group?

An association health plan will be governed under ERISA, which is the Employee Retirement Income Security Act of 1974. ERISA defines an association health plan as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.”

In addition, it’s important to note that small business association health plans won’t be eligible for larger health insurance plans if they have below 50 or 100 employees. In most states, businesses need to offer employees health insurance plans if they have 50 employees or more, or 100 employees or more. To be a part of an AHP, there needs to be less than this number of employees.

A health insurance pool for small business groups need to follow state laws, such as state laws governing Multiple Employer Welfare Arrangements, and federal laws including the Health Insurance Portability and Accountability Act, known as HIPAA. This specific act ensures that all patient information will be protected, regardless of what insurance plan they choose.

Can small businesses group together for health insurance?

Yes, small businesses group together for health insurance, so long as they follow the above requirements and are acting in the interest of their employees.

Small businesses can group together to create a fully-funded or self-insured plan. With a fully-funded plan, a third party insurance company, such as United Healthcare or Blue Cross Blue Shield, will foot the bill and ensure that patients are getting the coverage that they need.

On the other hand, self-insured plans are those that don’t have a third-party health insurance plan, but do still pay for costs using the savings from other small businesses, freelancers, and contractors.

What are the most recent changes to association health plans for small businesses?

Association health plans are no longer held to Obamacare rules. Instead, they are now regulated like large employer policies. 

One of the rules this does away with is the provision of offering essential health benefits, which changes the breadth of coverage. For some, this may be detrimental–such as those with chronic conditions–but for others, it may not be a concern.

Additionally, pricing can be impacted by:

• Gender
• Age
• Industry

But health status and pre-existing conditions will not affect prices for those covered under association health plans.

How did the Trump Administration affect association health plans?

When former President Donald Trump came into office, he signed the “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States,” on October 12, 2017. This plan promised to promote more association health plans for small business groups, as well as contractors.

Contractors are people that are not paid by employers, and that at the end of the year receive a 1099 form for their wages. These people do not receive health insurance benefits from their employer. Rather, they traditionally needed to pay out of pocket or find a private health insurance plan to ensure they received coverage under the Obama Care Act.

Now, these contractors and other small businesses can form together to create an association health plan and experience the benefits of a fully-insured or self-insured plan.

How does the new regulation on association health plans affect the ACA as a whole?

A major selling point of the Affordable Care Act was that all people would be treated the same, and there was a baseline of benefits that had to be offered.

With the new rules regarding association health plans, this facet of the health insurance industry would no longer be true for small businesses participating in the AHPs.

According to CNN, critics of the new regulations for AHPs say that they could be bad for the Obamacare exchanges. In theory, young healthy workers could all choose to be covered by the less comprehensive, but cheaper AHP plans. This could leave older and sicker Americans as the only enrollees in Obamacare plans, which could mean prices skyrocket, since the insurance companies are only covering sick people then.

Are association health plans regulated at the state or federal level?

Association health plans are regulated at both the state and federal level.

On the federal level, association health plans for small business employees and contractors need to follow the federal law known as the Employee Retirement Income Security Act of 1974 (ERISA). HIPAA, as mentioned earlier, must also be followed to protect patient privacy.

Other federal laws that need to be followed include the The Public Health Service (PHS) Act, The Affordable Care Act, and The Consolidated Omnibus Budget Reconciliation Act of 1985, just to name a few.

In addition, state-specific benefit mandates also need to be followed if an association health plan chooses to use a third-party health insurance carrier.

Find out if an AHS Plan Is Right for Your Small Business

If you think a small business association health plan could be the right solution for you, you can get the process started by browsing health insurance plans on eHealth to find one that fits your needs. You can also speak to one of our licensed insurance agents for more guidance.

This is article is for general information and may not be updated after publication.