Prepare Now for Association Health Plan (AHP) Rule Changes
Kevin Dunn, CEO of Decisely
Thursday - March 1, 2018 - HR Daily Advisor
Small business owners and HR teams know that a competitive benefits program
can be a difference maker when recruiting top new hires or attempting to retain
homegrown talent. But limited resources often leave small businesses frustrated
and fighting for attention from advisors or cobbling together their own plans.
Fortunately, a proposed rule modification for Association Health Plans (AHPs) is
about to completely reverse this dynamic.
Traditionally,
small businesses have few options when it comes to providing affordable
healthcare benefits for their employees. The cost per employee is prohibitive –
especially compared to larger organizations – and managing these benefits can be
more complicated and time consuming.
As a result, employer-sponsored benefits for small businesses have dropped by
25% since 2010, and a recent Wall Street Journal editorial noted that
roughly 11 million small business employees do not have access to
employer-sponsored benefits. This leaves many workers to source coverage for
themselves on the individual market or through state and federal exchanges.
Fortunately, there is an effort underway at the Labor Department that could
throw a lifeline to small businesses and their employees. By changing the
definition of gcommon business interestsh in the current Employee Retirement
Income Security Act (ERISA) and broadening its applications, the government is
loosening restrictions on who can pursue collective benefits sourcing programs.
An amended rule would make it possible for more small businesses, franchises and
small associations with less stringent industry, geographic or professional
affiliations to form an AHP.
For these businesses, the benefits would be tremendous. Employer-sponsored
benefits will now be within their reach because health benefits that are group
purchased can typically deliver 10-30% savings compared to individual small
employer purchasing. It will also widen the pool of available benefits to
employers and employees, and can reduce their administrative overhead. Instead
of being the small client for a broker, forming an AHP will make them a much
bigger fish with access to greater professional management, consulting,
oversight and advocacy resources.
These new plans can then return the competitive advantage to some businesses
and organizations. As Jack Calabrese from our AHP client, NAPA Insurance Center
explained: gOffering benefits gives our NAPA owners a competitive edge
when trying to hire and hold on to great employees. The NAPA Insurance
Center helps our owners offer benefits to their employee at lower rates than the
owners could source themselves.h
Small business owners and HR managers should begin preparing now to maximize
these advantages and to take advantage of the rule change as soon as possible.
Fortunately, a proven playbook already exists for how best to deliver these
association style benefits. This playbook will need to expand to a broader
qualified set of small business over time as the Department of Labor regulations
are released towards the end of 2018 or early 2019.
Today, an AHP or Trust can be sponsored by a group member association and
overseen by members of this organization. The AHPfs job is to aggregate and
manage member needs to secure coverage on behalf of its members. The AHP often
contracts with a broker specializing in small business and program management to
create a benefits portfolio for the members, negotiate with insurers on its
behalf, and provide program management. The goal is a turnkey solution for the
collective sourcing of small business benefits.
An AHP can be set up using three different structures for medical and other
benefits:
- Fully Insured Medical: This is the easiest plan to
administer and communicate. It requires no initial capital reserves and does
not share risk among the members. Instead, the insurer takes on all risk with
little or no financial outlay from the AHP at startup.
- Self-Funded Medical: Insurers prefer this approach
because it requires the AHP to fund some initial capital or financial
reserves. This means the association assumes a collective financial risk for
providing health care benefits to its members through an earmarked fund to pay
claims. The advantage to the AHP is group-wide savings if the collective group
has good claims experience over time.
- Hybrid Medical: Also called a Minimum Premium Program,
this approach blends risk for all parties and allows dividends or gain sharing
for members based on good loss performance.
We have found that more than 90% of our association customers at Decisely opt
for Self-Funded Medical plans because even though it brings with it some upfront
costs, the potential savings over time are much greater. That cost-benefit
calculation will vary for associations, so members should be thoughtful about
their choice.
In general, benefits leaders should plan for roughly 6 months from
contracting with a program creator/administrator, through insurer negotiations,
to the final launch of any group purchasing plan. This will include formalizing
the associationfs intended structure, including the formation of an AHP if one
does not already exist. A qualified ERISA attorney can guide this formation
process to ensure proper compliance and governance.
Next, the association should consider sourcing an external program manager to
help collect the appropriate data for underwriting AHP members, develop the
benefits offering, negotiate with insurers, and initiate the marketing and
administration of the AHP program. Once this plan is finalized, the program
administrator can begin activating the strategies, tactics and program
management required by AHP members, including call centers, website, reporting,
enrollment, and administration. At this point, the new AHP is ready for launch
for members and employees.
Ultimately, broader requirements of existing regulations will expand the
universe of employers that can offer company-sponsored benefits plans. Small
business, franchise, and association benefits teams should be planning now to
ensure they are leading this wave of change and making the most of the AHP
opportunity.
As the CEO of
Decisely, Kevin Dunn is building Decisely as the new standard in the
benefits technology and brokerage insurance space. Decisely is a trusted
advisor and turnkey SaaS technology for small business in the
US. Kevin joined Decisely from Mercer, where he created and
implemented the strategy and marketing for Mercer Health &
Benefits private exchange technology. He graduated with a B.B.A. in
economics and a MBA from Georgia State University. Kevin also serves
on the board of directors at Innovative Student Loans Solutions, a private
equity backed firm in Cleveland, Ohio.