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Association
Health Plans Revisited:
Jump-Starting Congress' Health Agenda
For the second time in less than a year, the House of Representatives
has passed legislation to allow federally regulated association
health plans (AHPs) for small firms. In February 2003, H.R. 660,
the Small Business Health Fairness Act of 2003, was introduced in
the House. The bill allowed small firms to pool together in associations
across state lines to offer health insurance, exempt from most state
insurance mandates. It passed by a vote of 262-162 in the House
in June 2003. It was referred to the Senate Committee on Health,
Education, Labor, and Pensions. Since that time, the bill has seen
no action. In an effort to “prompt action in the Senate,”
according to House Majority Leader Tom Delay (R-Texas), an updated
bill (H.R.
4281) with the same provisions as H.R. 660 was reintroduced
and passed on May 14, 2004.
Group
purchasing arrangements, including AHPs, vary widely in their structure,
and state regulation of such plans also varies. All such plans seek
to achieve cost savings by encouraging employers and/or self-employed
individuals to combine their purchasing power to negotiate health
insurance premiums lower than they could otherwise achieve. Some
group purchasing arrangements are self-insured, and therefore, able
to save additional costs of traditional insurers, including premium
taxes.
Group Purchasing Arrangements: Issues for States, an issue
brief prepared for the State
Coverage Initiatives program, highlights policy and regulatory
issues arising from group purchasing arrangements.
Association
health plans (AHPs) are group health plans sponsored by trade, industry,
professional, chamber of commerce, or similar business associations.
The pending legislation would establish rules governing the structure
and operation of such plans, including maintenance of reserves and
the interplay between federal and state authorities.
Proponents
of the federal AHP legislation (many business groups, including
the National Federation of Independent Business) argue it offers
much needed relief for small businesses by giving them purchasing
power. By extending ERISA to AHPs, the legislation would exempt
the plans from state regulations deemed costly and believed by proponents
to be a major financial and administrative obstacle for multi-state
group plans.
The
Blue Cross Blue Shield Association, National Governors’ Association,
Families USA, and other consumer groups comprise some of the critics
of the AHP legislation. They argue that plans will do little to
make premiums affordable for employers and their workers. Some contend
that such plans will cover the healthy and exclude high-risk individuals,
and still others fear further fragmentation of the small group market,
contending that states can more effectively regulate their unique
markets.
In
an effort to better understand the likely impact of exempting AHPs
from state regulation, some analysis of group purchasing arrangements
has been done. In particular, Mila Kofman and colleagues at the
Health Policy Institute at Georgetown University examined states’
experiences with Multiple Employer Welfare Arrangements (MEWAs),
self-insured AHPs, often with less stringent licensing requirements
than traditional insurers. As reported in a Commonwealth
Fund issue brief, MEWAs have “a troublesome history of
financial instability.” Kofman warns that policymakers must
be aware of the need for consumer protections, particularly with
respect to plan solvency.
Currently,
with HCFO funding, Kofman and colleagues are conducting a comprehensive
examination of pooled purchasing arrangements, including AHPs. They
will analyze the various regulatory structures for both self-insured
plans and traditional health plans, providing guidance for both
state and federal policymakers as they continue to debate the merits
of group purchasing arrangements.
As
AHPs linger on the radar screen of policymakers, HCFO projects will
continue to inform the debate about their strengths and weaknesses.
HCFO-funded
Projects Relevant to the Development of AHPs:
Title:
Private Insurance Markets: The Missing Link – Association
Health Plans and Other Pooled Purchasing Arrangements
Institution: Georgetown University
Time Period: April 2003 – September 2004
Principal Investigator: Mila Kofman
What
are the dynamics of pooled purchasing arrangements? In this study,
the researchers are: (1) identifying and describing different types
of pooled purchasing arrangements, identifying examples of each
type, and discussing how such arrangements are regulated by states
and the federal government; (2) describing how coverage sold through
such arrangements is regulated, focusing on key market reforms and
consumer protections as well as applicable federal standards; (3)
providing estimates on the prevalence of such arrangements; (4)
summarizing how self-insured arrangements are regulated, identifying
weaknesses in the law, discussing recent insolvencies, and identifying
successful oversight approaches; and (5) discussing market failures
focusing on the recent influx in health insurance scams promoted
through pooled purchasing arrangements. The objective of this study
is to inform state and federal policy discussions on expanding the
role of association health plans and other pooled purchasing arrangements.
In addition, it will help policymakers address current problems
that consumers face such as insolvency and fraud.
As
noted above, Ms. Kofman completed an issue
brief for the State Coverage Initiatives program that lays out
the types of issues state policymakers need to be aware of in regulating
group purchasing arrangements.
In
addition, she authored an issue
brief for The Commonwealth Fund on states’ experiences
with AHPs, particularly in terms of the solvency of self-insured
plans.
Title:
Sustaining Individual Health Insurance Markets Under Community
Rating and Open Enrollment
Institution: Rutgers, The State University of New Jersey
Time Period: April, 2002 - September, 2003
Principal Investigator: Joel Cantor, Sc.D.
What
was the extent of risk selection in New Jersey’s Individual
Health Coverage Program (IHCP), which was implemented in 1992 as
part of the state’s individual market reforms? What are the
policy options for sustaining access to individual health plans
and describe the role of the non-group coverage in New Jersey’s
health care insurance market? Using data from The Robert Wood Johnson
Foundation-funded New Jersey Family Health Survey (NJFHS), the researchers
aimed to answer the following questions: (1) How has the distribution
of risk changed in the IHCP since 1995-6 and what are the implications
of those changes for the viability of community rating and related
reforms? (2) What is the potential impact on current or potential
IHCP enrollees of adopting modified community rating? and (3) What
role does the IHCP play in the continuum of coverage in New Jersey?
They analyzed changes in New Jersey’s small group market in
order to inform state policymakers who are considering reforms to
make the non-group markets accessible and viable.
- Monheit,
Alan C., Ph.D., Joel C. Cantor, Sc.D., et.al., “Community
Rating and Sustainable Individual Health Insurance Markets: Trends
in the New Jersey Individual health Coverage Program,” forthcoming
Health Affairs, July 2004.
Title:
State Health Care Purchasing Practices
Institution: JSI Research and Training Institute
Time Period: December, 2001 - November, 2002
Principal Investigator: James H. Maxwell, Ph.D.
What
are the purchasing practices of state employers and what are the
implications for employees and future purchasing? This study continued
the researchers' earlier HCFO-funded work looking at purchasing
among Fortune 500 employers and built on earlier HCFO work conducted
by Bryan Dowd. Specifically the researchers: 1) documented the health
care purchasing practices among state employers; 2) explored the
relationship between health care purchasing and procurement for
other goods and services; 3) studied the effects of public sector
unions and collective bargaining on health benefits; 4) compared
the results from this study to the findings from the Fortune 500
study; and, 5) examined innovation in purchasing among state employers.
The study was to provided state executives and other decision makers
with more information about the purchasing behavior of state employers,
as documented in the following publications:
Title:
Guaranteed Renewability in Individual and Group Health Insurance:
Functioning and Future Prospects
Institution: University of Pennsylvania, The Wharton School
Time Period: November, 2001 - October, 2002
Principal Investigator: Mark V. Pauly, Ph.D
If
private insurers can be encouraged to improve the protection offered
by their products, is it possible that those improvements can benefit
consumers and obviate the need for regulation with undesirable side
effects? This project focused on the individual and small group
insurance markets; namely, the sharp increases in premiums that
occur when an individual incurs large medical expenses. The applicants
carried out three research tasks. They: 1) estimated the age profile
of premiums for an “optimal,” benchmark guaranteed renewability
(GR) policy that would cover claims (including the expenses of high-risk
insureds) but not be priced so high that low-risks would leave for
a cheaper policy; 2) used data from MEPS, longitudinal claims data
bases, and the Health and Retirement Survey to calibrate an empirically
based, “exploratory” model derived from the optimal
policy described in 1); and 3) simulated hypothetical case studies
that members of the Society of Financial Service Professionals,
participating in “virtual focus groups,” evaluated on
the basis of degree of realism. The objective of the study was to
determine the effects of guaranteed risk on public policy, (particularly
if GR could provide protection to high risks in a population) and
inform insurance firms and insurance regulators on how to make GR
work better. The findings are described in the following publications:
Title:
The Anatomy of ERISA Health Plans: Describing their Basic Structure
and Key Areas of Variation
Institution: George Washington University, Center for Health
Services Research and Policy
Time Period: October, 2001 - July, 2002
Principal Investigator: Phyllis C. Borzi, J.D./Karl Polzer,
Ph.D
How
do variations in ERISA health plans affect the formation of policy?
The researchers examined the anatomy of key types of ERISA health
plans (i.e. identifying the fundamental characteristics, features,
and structures that distinguish the plans), focusing on those distinctions
that are relevant to the current “patients’ rights”
and “defined contribution” debates. In addition, they
attempted to correct “prevalent public misconceptions”
that may impede legislative development (i.e. the misconception
that HMO’s are making health plan decisions, when, in fact,
decisions may be made by the administrators or fiduciaries of an
ERISA plan). The researchers hypothesized that “there exist
important areas of variation among different types of ERISA health
plans that might present policymakers with cause to consider crafting
flexible laws and regulations that take into account this variation.”
The issue brief below provides policymakers with information on
variations in ERISA health plans relevant to current debates on
health plan regulation:
Title:
Studies of the Working Uninsured, Their Dependents and Insurance
Reform on Their Behalf
Institution: The Urban Institute
Time Period: June, 2000 - July, 2002
Principal Investigator: Linda J. Blumberg, Ph.D.
What
are the effects of certain insurance market reforms that were designed
to expand coverage? Researchers at the Urban Institute conducted
several analyses looking at the working uninsured and these effects
using the Current Population Survey (CPS), the National Survey of
America’s Families (NSAF), and the National Health Interview
Survey. In particular, they aimed to answer the following five questions:
1) Who are the working uninsured? 2) Why do employer-sponsored coverage
rates vary across the 50 states? 3) Have health insurance market
reforms affected the composition of insured risk pools? 4) Did HIPAA
have any effect in the small group market? and 5) Why do so many
workers in large firms lack health insurance? The objective of this
series of studies was to provide a better understanding of the working
uninsured in order to better inform the policy debate about coverage
expansions and identify those interventions most likely to work.
Title:
An Evaluation of the Primary and Secondary Effects of Insurance
Market Reform
Institution: Bowman Gray School of Medicine
Time Period: September, 1996 - December, 2000
Principal Investigator: Mark A. Hall, J.D.
What
are the effects of state health reforms? Researchers at the Bowman
Gray School of Medicine evaluated insurance market reforms in 12
states. The effects within a single carrier's various lines of business
were compared among carriers within a given state, and these statewide
patterns were compared across states. The study consisted of intensive
case studies of insurance market reforms and their effects in a
non-random sample of six states that have enacted varying reforms,
and a less intensive study of an additional six states. The researchers:
1) conducted two rounds of open-ended interviews of key informants;
2) conducted participant observational studies of insurance agents;
3) did content analyses of sales literature and news articles; and
4) conducted statistical analyses of archival documents and secondary
data. The objective of this study was to inform lawmakers and the
public policy community on whether and how these reforms have achieved
their multiple purposes or caused any negative consequences, and
how these reforms might be improved.
- HealthMarts,
HIPCs, MEWAs, and Association Health Plans: A Guide for the Perplexed
- The
Geography of Health Insurance Regulation: A Guide to Identifying,
Exploiting, and Policing Market Boundaries
- Purchasing
Cooperative for Small Employers: Performance and Prospects
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