Would association health plans, a type of insurance that makes it easier for small employers to band together, free of many of the requirements of the Patient Protection and Affordable Care Act, provide enough protections to consumers?
Gov. Matt Bevin's health secretary says they would. Attorney General Andy Beshear, who is running against Bevin, says they wouldn't.
Bevin and officials from 15 other states, filed a court brief June 7 urging the U.S. Court of Appeals for the District of Columbia to reverse a lower court's decision against expanded access to association health plans.
The brief prompted a verbal tussle between Beshear, one of the original plaintiffs in the lawsuit, and Health Secretary Adam Meier, who released his statement from the governor's office, where he was deputy chief of staff, instead of the Cabinet for Health and Family Services, which he leads.
Beshear issued a statement saying, “I disagree with the governor’s new action because it threatens health care coverage for Kentuckians, including people with pre-existing health conditions. While Matt Bevin continues his work to strip vital coverage away from our families, I am fighting to make sure all Kentuckians get the health care they need and can afford it.”
In response, Meier called on Beshear to retract his "false and outrageous claim" and linked to official guidance from the U.S. Department of Labor that says association health plans "may not charge higher premiums or deny coverage to people because of pre-existing conditions."
“The Department of Labor has been very clear that association health plans cannot deny coverage to individuals based on pre-existing conditions,” Meier said. “To state otherwise is false and shows a complete lack of understanding of the intent of the Department of Labor rule, which is to provide workers and small businesses with greater access to affordable health insurance options. AHPs are a great way for sole proprietors and small businesses to have the same kind of health coverage that big corporations offer their employees.”
Technically, Meier is correct. But critics of the AHP rule say that while they recognize that the guidance says AHPs can't deny coverage based on pre-existing conditions, the rest of the policy is set up to allow them to easily do so by simply denying coverage for conditions they don't want to cover, such as not covering insulin for diabetics or not covering mental-health care.
The American Medical Association sides with Beshear on this issue. In a 2018 friend-of-the-court brief, the AMA laid out a list of concerns.
"There is a significant risk that AHPs could disproportionately impact individuals with pre-existing conditions," the AMA said. "To be sure, on its face, the regulation states that it protects coverage of pre-existing conditions. But in reality, AHPs can easily evade that crucial legal requirement by using proxies for health status."
For example, AMA wrote that AHPs "can charge premiums based on factors that are not explicitly defined in terms of health or medical conditions, but that closely track those forbidden factors."
Further, it notes that the AHP rule allows them to charge different premiums based on age, gender, industry or geography. "But each of those seemingly neutral characteristics can be used to disguise differential treatment based on health status or one's likelihood of suffering from particular pre-existing conditions."
The AMA argued, "Denying patients coverage based on seemingly neutral characteristics that the insurance industry knows, in reality, are associated with higher medical costs or pre-existing conditions would leave patients with lower quality care, greater out-of-pocket expenses, and overall poorer health outcomes. Those consequences subvert the object and design of the ACA."
In addition to its concerns that AHPs will undermine the consumer protections in the ACA, the AMA said they would destabilize ACA exchanges by pulling healthy individuals out of ACA plans.
Citing examples, the AMA also noted that AHPs have a "long history of fraud and abuse" and adds that the AHP rule itself recognizes this when it says, "The Department anticipates that the increased flexibility afforded AHPs under this rule will introduce increased opportunities for mismanagement or abuse, in turn increasing oversight demands on the Department and state regulators."
What's it all about?
President Donald Trump signed an executive order in 2017 to expand access to association health plans, stating that expanding access to such plans would "allow more small businesses to avoid many of the [Patient Protection and Affordable Care Act's] costly requirements."
In June of last year, the Department of Labor did just that, by expanding the types of groups that could ban together to offer coverage under an AHP.
The department also loosened association requirements so that more of them could be classified as large-employer coverage, which would exempt them from having to cover the 10 essential health benefits required by the ACA, like covering mental health or prescriptions. Nor, under the new rule, would they be required to pay the tax that large-group market insurers have to pay when they choose to not cover them. As previously noted, association insurers can set premium rates based on age, gender, industry or geography.
In March 2019, the policy was struck down in federal court following a lawsuit filed by 11 attorneys general, including Kentucky's Beshear.
In his ruling, Judge John D. Bates, of the U.S. District Court for the District of Columbia, who was appointed by President George W. Bush, concluded that the labor department "unreasonably expands the definition of "employers" to include groups without any real commonality of interest" and that it had misinterpreted the Employee Retirement Income Security Act's definition of an employer when it allowed working owners without employees to be covered by the AHPs. Bates added that the policy "was intended and designed to end run the requirements for the ACA."
This month, Bevin, along with 15 other states, filed a court brief urging the federal appeals court to reverse the district court's ruling. Bevin's involvement put Kentucky on both sides of the issue.
"By broadening the definition of a qualifying employer, more small businesses can take advantage of that purchasing leverage," says the brief. "Thus 'a substantial number of uninsured people will enroll in AHPs because the Department [of Labor] expects the coverage will be more affordable than what would otherwise be available to them.'"
AHPs in Kentucky?
The 2019 Kentucky General Assembly overwhelmingly passed House Bill 396 to update the Kentucky insurance code to adopt the Department of Labor's final rule and expansion of AHPs. Bevin signed it into law March 26.
Kentucky already has some association health plans that are fully insured and industry specific for employer groups, but has not approved any under the new policy, said Susan West, spokeswoman for the Public Protection Cabinet, which includes the Kentucky Department of Insurance.
West said in an email that the state was "on the cusp" of approving a fully insured AHP under the new rules that would have gone into effect June 27, but it has since been put on hold because of the federal court ruling and subsequent appeal.
"Given the recent federal ruling and discussion among regulators at the recent [National Association of Insurance Commissioners] meeting, in which Kentucky participated, the DOI is waiting on the federal [Department of Labor] to determine their course of action and appellate options before moving forward with approving specific plans and registering associations," West said.
Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Media at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.