Resources & Insights

Association Health Plans: A Solution, or More of the Same?

January 23, 2018

By Scott McGraw and Amy Greinke

How does a health care plan without emergency services, prescription drugs or mental health care sound?

association health plans
CCIG Employee Benefits VP Scott McGraw.


OK, great, because that’s what small-business owners and others who join association health plans, or AHPs, might end up with were they to enroll in these plans.

The Labor Department issued proposed rules in early January that would make forming an AHP easier.

DOL officials said as many as 11 million Americans could find coverage through association health plans, which would be exempt from some of the requirements of the Affordable Care Act. (The three most popular elements of the ACA will remain in place: no pre-existing conditions, no lifetime dollar limits on services, and plans must cover offspring up to age 26.)

association heath plans
CCIG’s Amy Greinke.

Still, it’s hard to say if these plans, which could be established across state lines, will be the answer to our health care coverage woes.

AHPs have a history of fraud and abuse that left employers with hundreds of millions of dollars in unpaid medical bills. Moreover, it’s likely the AHPs will be aimed at enrolling just the healthiest, youngest individuals. AHPs also have been known to raise rates to the point that employers decide to simply move on.

The idea of resurrecting AHPs no doubt has its fans.

“Between AHPs, health savings accounts, and voluntary coverages along with the traditional group plans, there is an exciting opportunity to totally reshape health insurance,” John Sarich, VP of strategy at VUE Software, a firm that specializes in innovating and automating insurance business processes, told Managed Healthcare Executive.

AHPs certainly sound good, at least on the surface.

Called “Small Business Health Plans” in the Labor Department’s proposal, association plans would be open to small employers and sole proprietors and their families. They could be organized on the lines of a geographic area or an industry. In some cases, associations could have members nationwide.

An association would be considered a single large employer, rather than a cluster of small employers, and so its health plan would be treated as a large group health plan.

As a result, an association would be free from some of ACA requirements. Primarily, it would not have to offer many of the benefits required under the ACA, or Obamacare as it’s also known.

That, in turn, should mean lower premiums for enrollees – though, again, we’re talking about health policies without many of the benefits that most of us have come to expect.

The Labor Department is still working on the rules regarding AHPs. Nothing final is expected until spring, if not later this year. Court challenges that delay implementation are a distinct possibility depending on how the final rule looks.

Under the best-case scenario, AHPs could lower costs for small businesses and open up coverage to more individuals. But they also easily could create financial distress when an unexpected health problem strikes.

Scott McGraw is Vice President of CCIG’s Employee Benefits division. Reach him at 720-330-7924 or Amy Greinke is a CCIG Insurance Advisor. Reach her at or 720-330-7934.

CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

Eligible Employers

The proposed rule would allow employers to join together to form an AHP that is a single ERISA plan if either of the following requirements is satisfied:

  • The employers are in the same trade, industry, line of business or profession; or
  • The employers have a principal place of business within a region that does not exceed boundaries of the same state or the same metropolitan area (even if the metropolitan area includes more than one state).

In addition, the proposed rule would allow working owners, such as sole proprietors and other self-employed individuals, to join AHPs.

Additional Requirements

To distinguish single-plan AHPs from commercial insurance-type arrangements, the proposed rule would require AHPs to satisfy the following conditions:

  • The group or association exists for the purpose, in whole or in part, for sponsoring a group health plan that it offers to its employer members;
  • The group or association has a formal organizational structure with a governing body and has bylaws or other similar indications of formality;
  • The group or association’s member employers control its functions and activities, including the establishment and maintenance of the group health plan, either directly or through the regular election of directors, officers or similar representatives; and
  • Only employees and former employees of the employer members (and family members of those employees and former employees) may participate in the group health plan sponsored by the association.
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