You may have heard the term “Association Health Plan” thrown around before, but not really understood how it’s different than a traditional group health insurance plan. Even if you’re looking for a small group health insurance plan, or already covered by one, it’s good to know what innovations are emerging in the health insurance world.

Let’s explore what Association Health Plans could mean for you, as a small business, and how they may differ from the typical group health insurance plans you may be looking at for your small business.

What is an Association Health Plan?

Association Health Plans (AHPs) are formed when multiple small employers band together to offer a single large group health plan.  Many small business owners are attracted to AHP insurance because of its potential cost-savings. Potential savings can be in reduced health insurance administration costs (administration cost of one plan is shared among multiple employers), a larger pool of plan participants with which to spread the insurance risk, the improved position to negotiate the cost of care with community providers and the cost of coverage with insurers. 

What are the types of Association Health Plans?

AHP insurance plans share many common characteristics of large group health plans. AHP benefits often incorporate plan participating healthcare providers as cost-containment and quality of care measures. Such plans may be Health Maintenance Organizations (HMO), Exclusive Provider Organizations (EPO, Point-of-Service (POS), or Preferred Provider Organizations (PPO). 

Also, the multiple employers sponsoring an AHP insurance plan can choose to have the plan fully insured, fully self-funded, or partially self-funded up to a designated medical expense cap, at which point the plan’s future expenses are insured by an insurance carrier, typically the entity that is administering the plan, or its reinsurance carrier. 

As with other health insurance, AHPs must comply with applicable state and federal laws. 

How do Association Health Plans (AHPs) differ from group health insurance?

• The term group health insurance typically refers to an insurance product offered by a single business. If you purchase group health insurance, it provides coverage for you, your eligible employees, and eligible dependents. 
• If you offer health insurance to your employees as a small business, it must be compliant with Affordable Care Act (ACA) standards for small group plans, and it must cover all essential health benefits.
• Association Health Plans, on the other hand, have to conform to certain ACA requirements, but generally enjoy the greater flexibility large group plan sponsors have to structure the benefits of their plans.
• AHP can technically be “insurance sold across state lines” since the businesses involved in the association may not be required to be in the same state.

Association Health Plans are not actually insurance products

Association Health Plan is an overarching term to describe how the group health insurance plan comes about—by multiple employers coming together to form or purchase a single group health plan. It is not a health insurance product sold by insurers, per se. 

According to the health insurance trade association, AHIP, Association Health Plans are organized around a commonality, such as:

• Professional organization
• Industry group
• Trade organization
• State or local chamber of commerce

What resulted from the presidential executive order concerning Association Health Plans?

AHPs formed prior to the Trump administration and the Department of Labor’s new rule had to have members share a common interest, create the association for purposes other than providing health insurance, and have one or more employees in addition to the business owner to be treated as a group health plan under the Employee Retirement Income Security Act (ERISA). 

The Trump administration proposed a change that would expand the ability of small employer groups and individuals to band together to obtain health insurance through Association Health Plans. The Department of Labor’s final rule, issued by executive order during the Trump administration, relaxed certain key requirements governing AHPs. Key changes in the final rule include:

• Unrelated employers in the same geographic location — in addition to employers in the same trade, industry, line of business or profession — can form an AHP. The same geographic location can be state-wide or cross state boundaries. 
• The primary purpose of the employer group or association can be to provide health benefits, although it must also exist for another substantial business purpose.
• “Working owners”  (e.g., sole proprietors) can participate in an AHP.

As a result of these modifications, the rule sought to provide more small businesses and proprietorships greater access to AHPs. Supporters of the rule change suggest that AHP’s would drive down the costs of group health insurance plans, and more small businesses would be able to offer health insurance to their employees. Opponents caution that broadening access to AHP insurance could potentially destabilize the market created by the ACA.

While the Trump administration eased requirements for the AHPs with the DOL rule, the U.S. District Court for the District of Columbia struck down the rule in 2019. Presently an appeal pends with the U.S. Court of Appeals for the D.C. Circuit and the Biden administration has not signaled that it plans to take any action. Some states have moved forward with regulations related to AHPs.

How does the expansion of Association Health Plans affect small businesses?

The expansion of Association Health Plans would result in more small businesses and sole proprietors able to pool together to offer an AHP insurance plan. If you are uncomfortable with the unclear direction AHP regulations may take, however, you still have other attractive, cost-efficient options for offering group health coverage.  You may want to consider an individual coverage health reimbursement arrangement, or ICHRA, or a group health plan designed for small business.  Learn more about the differences between ICHRAs and small group health plans from our article, ICHRA vs Group Health Insurance. 

Be sure to visit our small business health insurance page and explore the many affordable group health insurance plans available to you and your business. The eHealth plan search tool makes it easy to compare plans. And if you have questions, eHealth licensed agents are ready to assist you in finding the right plan for your business needs at an affordable price.