Resurrecting old model for individual health-insurance market may limit who gets covered and how well, columnist says

Editor's note: U.S. Sen. Rand Paul of Kentucky has been one of the leading advocates of association health plans.

By Trudy Lieberman, Rural Health News Service

A new health insurance option awaits consumers this fall. Proponents say it will offer lower premiums and relief from increasingly expensive Obamacare policies sold in the so-called individual market. That’s where people who don’t have employer or government-sponsored insurance go when they need coverage.

It’s no secret that rising premiums have hurt people in that market if they are among those whom the law considers too wealthy for subsidies to help them out. For example, families of four with incomes above $100,400, and single people whose incomes exceed $48,560.

So the Trump administration has approved the return of association health plans, called AHPs for short. Fraternal or professional organizations can sponsor one. A single proprietor or sole owner of a business can also set up one of these new arrangements.

These “new” arrangements are not new. They were around for years before the Affordable Care Act was passed in 2010, and they’ve been resurrected to provide a low-cost option for a small slice of the insurance marketplace. Labor Secretary Alexander Acosta offers this rationale: “Many of our laws, particularly Obamacare, make health care more expensive for small businesses than large companies. AHPs are about more choice, more access and more coverage.”

Once again the individual market may become the Wild, Wild West of insurance, as sellers pick and choose what benefits to offer. They can present a shopping nightmare for consumers who try to slog through the market and understand what they’re buying. Many of the protections offered by the ACA are gone, and shoppers are on their own to sort through the fine print that may or may not disclose what they are buying.

For example, the Affordable Care Act outlawed the practice of considering a person’s pre-existing health conditions before issuing a policy, one of the most important protections it provided. Under the government’s rules for AHPs, a person’s health still cannot be factored into the decision to issue a policy. But insurers may find a way around this limitation, says Sabrina Corlette, a research professor at Georgetown University’s Center for Health Insurance Reforms. “The way benefits are designed can make a policy very unattractive to certain groups of sick people,” she told me.

For example, if an insurance group doesn’t want to cover a lot of people with HIV/AIDS, it could create a network that includes almost no doctors who treat people with that condition.

AHPs must still cover the ACA’s preventive services, such as mammograms and diabetes screening. But other ACA protections are gone. Fewer benefits, and less comprehensive benefits, are the trade-offs for cheaper policies. “AHPs will have more flexibility in how they vary premiums and what benefits are covered,” says Cori Uccello, senior health fellow at the American Academy of Actuaries.

Here’s where the shopping task gets tricky. AHPs won’t be required to cover any of the ACA’s package of essential benefits: things like mental health, maternity, and prescription drugs. It’s also possible their benefits could come with limitations on hospital stays and doctor visits. Comparing policies with these different combinations of benefits will take some effort.

There are other changes, too, that would-be shoppers should be aware of. The “flexibility” touted by the labor secretary means that AHPs will now be able to use gender in deciding how much to charge. Women could be forced to pay more than men because insurers say that, especially at younger ages, women have more claims.

On the Health Affairs blog, Katie Keith of Keith Health Policy Solutions showed what could happen when gender is factored into pricing. Keith pointed to a Blue Cross Blue Shield comment letter that suggested AHPs could charge young men more than 40 percent less than traditional insurers could, while charging young women 30 percent more, or higher.

Occupations could also matter. The AHPs could charge engineers 9 percent less than traditional insurers but charge taxi drivers 15 percent more. Engineers apparently file fewer claims than taxi drivers.

That may be the biggest change, that AHPs will be able to consider people’s jobs in the decision to insure them. The ACA had outlawed the practice of occupational underwriting, which had meant that waiters, musicians, models, beauty operators, fry cooks, even doctors and lawyers sometimes couldn’t obtain insurance because insurance stats showed people in those occupations filed more claims. Will people in those occupations be turned down now?

Association health plans might look like a panacea for the country’s health-care woes. But questionable practices are likely to resurface, and it’s not clear state insurance departments, which had a tough time keeping tabs on fraud and abuse years ago, are up to the job of policing them.

AHPs may well throw the individual market into a big mess without addressing the fundamental problem they purport to solve: the underlying high price of American medical care.

What would you choose: lower premiums or skimpier benefits? Write to Trudy at trudy.lieberman@gmail.com.