Starting Jan. 1, small businesses looking for affordable health insurance will have even more options, thanks to a new federal regulation that gives small employers — including sole proprietors and those who are self employed — access to insurance coverage previously available only to large companies. AssociationHealthPlans.com has assembled the following information to help small business owners decide whether this coverage fits their needs.
Association health plans are a type of group medical insurance where employers—including freelancers, sole proprietors and the self-employed—can join together to enjoy the same savings and plan options as employees of large companies. To qualify, they only need to share a professional similarity or the same business region.
“From chambers of commerce to national organizations, we’re seeing a big uptick in groups looking to combat rising health insurance costs by offering association health plans to their members,” said Kev Coleman, president and founder of AssociationHealthPlans.com. Some examples of states with new association health plans include Texas, Michigan, Florida, Georgia, Alabama, Minnesota, Oklahoma, Nebraska, Wisconsin, Vermont and Nevada. “We expect this activity to accelerate through 2019 as the regulation is fully implemented.”
According to the Department of Labor, association health plans could benefit up to 11 million small business employees, freelancers and family members who lack employer-sponsored insurance.
Here are five things to know:
1. These are not Affordable Care Act plans, and their benefits may differ.
While the regulation allows associations to design health plans around employee needs and employer budgets, association health plans do not have to offer all of the essential health benefits required by the Affordable Care Act. However, large group association plans are still subject to state benefit rules as well as numerous federal benefit requirements relating to issues such as maternity care, pre-existing condition coverage and preventive care. Association health plans must also provide a Summary of Benefits and Coverage that describes insurance features in “plain language.”
2. New options are available Jan. 1.
The new association health plan regulation has an effective date that is staggered. Jan. 1 is the date that existing associations may launch self-funded health plans under the new regulations. These plans can have even lower costs than fully insured plans because an insurance company does not make a profit off their coverage, and the plan is not subject to normal health insurance taxation.
New fully insured (meaning they are insured by a third-party health insurer) plans became available Sept. 1, 2018. New self-insured association health plans will be available April 1, 2019.
3. Large group association health plans cover pre-existing conditions and cannot deny coverage or raise premiums based on an individual’s health status.
Multiple federal regulations apply to association health plans. Among the rules governing these plans is the requirement to cover pre-existing conditions within any Essential Health Benefit category included within the insurance plan. Additionally, people eligible for association membership cannot be denied insurance based on health factors nor can their premiums be increased due to health factors.
4. Part of the gig economy? You can qualify, too.
One of the major changes to association health insurance under the new regulation is its ability to cover self-employed individuals who are not part of a business with other employees. And you don’t have to be incorporated. Informal work — such as handyman work, tutoring, music lessons, etc. — would be just as legitimate as independent contracting for a company.
5. There are new provisions to discourage fraud and mismanagement.
Because the history of association health plans includes examples of mismanagement and fraud, the new regulation incorporated a series of measures to promote sound governance and solvency. These measures include the requirement that the association health plan be controlled by the employers making up the association. Insurance companies, medical providers and other entities with conflicts of interest are prohibited from controlling an association health plan. Vendors performing services on behalf of an association health plan (e.g. record keeping, compliance, marketing, etc.) are prohibited from receiving more than reasonable compensation for these services. There is also a class of prohibited transactions that prevent self-serving transactions that work in the interests of an association employer or affiliate rather than the plan and plan participants.
AssociationHealthPlans.com is a leading online resource supporting the emerging association health plans market. AssociationHealthPlans.com is headquartered in Nashville, Tennessee.