Do Association Health Plans Have to Cover Essential Health Benefits?

Lois Gleason, CEBSJuly 19, 2018August 24, 20181 Comment

Association health plans (AHPs) are not new. So why are they now in the news? Recent federal regulations make it easier for groups of employers and small business owners with little in common to form or join AHPs that are treated as single employer health plans. As a result, more individual business owners or small employers might join AHPs if the health coverage available is less costly than what they could purchase in the individual or small-group insurance markets.

What could make association health plans less costly?

Large groups typically have more purchasing power than small groups or individuals. They can leverage better prices for health care due to economies of scale and because annual large-group medical claims are more predictable than annual claims for individuals or small groups.

Under the Affordable Care Act (ACA), individual and small-group health plans are required to provide what are known as ten “essential health benefits” (EHBs). However, large-group health plans with more than 50 employees do not have to. Under the new regulations, AHPs with more than 50 members would be treated as one large employer for some purposes and would not be required to offer all ten EHBs.

Although they are not required to, most large-group plans do provide EHBs in order to attract and retain employees in a competitive labor market. Whenever an EHB is provided, the benefit is subject to limits on cost sharing, and the plan sponsor cannot impose a maximum annual or lifetime dollar payment limit on that benefit.

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What are the ten EHBs?

HealthCare.gov lists the following essential health benefits small and individual plans must cover:

Ambulatory patient services (outpatient care you get without being admitted to a hospital)
Emergency services
Hospitalization (like surgery and overnight stays)
Pregnancy, maternity, and newborn care (both before and after birth)
Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
Prescription drugs
Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)

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There are concerns that association health plans will not offer all ten EHBs if they don’t have to. In a blog dated March 9, 2018, Families USA said these benefits were commonly excluded from coverage by health plans not required to offer all the EHBs:

Outpatient prescription drugs
Mental health services
Substance use services

They are also concerned other specific treatments might not be covered, and an average health plan member might not realize it until they needed a specific type of treatment.

What rules do association health plans have to follow?

Although AHPs do not have to cover every single EHB, they are subject to many other federal and state laws and regulations, such as the following:

State laws and mandates. AHPs, whether self-funded or insured, are considered multiple employer welfare arrangements (MEWAs) and as such are subject to state laws and mandates that are not inconsistent with ERISA. State AHP regulations are not preempted by ERISA.
Substantial coverage. Under ACA, group health plans must provide substantial coverage of in-patient hospitalization and physician’s services and must cover at least 60% of the cost of covered benefits.
Cost-sharing regulations. Whenever an EHB is provided, the benefit is subject to limits on cost sharing, and the plan sponsor cannot impose a maximum annual or lifetime dollar payment limit on that benefit.
Preventive services. ACA requires coverage of certain preventive services without cost sharing.
Pregnancy Discrimination Act
Newborns’ and Mothers’ Health Protection Act
HIPAA nondiscrimination rules
Additional nondiscrimination rules specific to AHPs to minimize the possibility of discrimination on the basis of health status.
Mental Health Parity and Addiction Equity Act (MHPAEA)
COBRA

What about other laws?

It is unclear whether certain other federal laws apply to association health plans, such as Medicare secondary payer rules, employer shared responsibility payments, premium tax credit eligibility rules, network adequacy standards, and more.

What’s going to happen now?

It will soon be easier for unrelated small businesses with little in common to form AHPs offering health care coverage for members. AHPs that are large enough can be treated as one large employer for certain health care law purposes. They would not have to cover all EHBs. However, they would be subject to other regulations, including state laws. States would be able to regulate AHPs operating in their state. These regulations could be stricter than federal laws and would not be preempted by ERISA if they are not inconsistent with ERISA.

It remains to be seen how many individuals and businesses will turn to AHPs for health coverage and how robust the typical coverage an AHP provides will be.