Association health plans would provide a way to get insurance with lower premiums to some workers, but lingering concerns over the plans remain.
By Rose Hoban
Realtors, small business owners and other employees in small businesses could have access to another option for health insurance if the state legislature has its way. In the coming days, itâ€™s likely the General Assembly will be sending a bill to Gov. Roy Cooper that allows for the creation of association health plans, to allow for what could be plans with lower premiums.
Senate Bill 86 represents a priority long held by many in the state as a way of getting health insurance to more North Carolinians. It would allow long-standing statewide associations such as the NC Realtorsâ€™ Association or the state Chamber of Commerce to create plans for their members.
â€œAs a working business owner, I manage employees and independent contractors. Not one of my team can afford health insurance, said Wendy Harris, a real estate agent from Fayetteville who is the legislative liaison for the Realtorsâ€™ association. She said about 6,000 of the stateâ€™s 45,000 Realtors are uninsured. â€œThe number one thing weâ€™ve heard is the stories of the challenges and hard choices our members are facing because of the rising costs of coverage.â€�
These types of plans were nixed under the Affordable Care Act, which required all insurance policies to contain 10 essential benefits and disallowed so-called â€œskinnyâ€� plans that provide little beyond basic catastrophic coverage, if that.
Association health plans were green-lighted again under an executive order signed by President Donald Trump in October 2017, which was seen by many as a way of undermining former President Barack Obamaâ€™s ACA.
But the plans also come with a host of caveats. They make some observers nervous because in the past association health plans have produced substandard policies that left some patients with big bills or skyrocketing premiums.
â€œIâ€™m not taking anything away from the Farm Bureau or the Realtors or the restaurant association. They need to be very, very carefully regulated because thereâ€™s a lot of bad history with some of these,â€� said March of Dimes lobbyist Peg Oâ€™Connell, an attorney who specializes in insurance law.
Similar measures designed to fill this hole in the health insurance market have fallen short in previous years, as prior bills have allowed for so-called â€œskinnyâ€� plans that would be bare-bones that failed to garner enough legislative support.
Advocates have warned that these skinny plans would skim healthy consumers out of the larger ACA marketplace risk pool, creating the conditions for whatâ€™s called an â€œinsurance death spiralâ€� where increasingly, only unhealthy people are left in the marketplace, increasing costs to insurers and forcing them to raise premiums. This could push out healthier people and raise prices for those remaining covered.
In the past, the advocates have prevailed in stopping such a bill. But this year, the combination of increased premiums for consumers and negotiations between the Senate and the House have produced a bill thatâ€™s likely to hit Gov. Roy Cooperâ€™s desk soon. The bill passed the House Wednesday evening and now needs approval from the Senate.
All this activity might be for naught, however, as federal approval for the plans is tied up in federal court.
Concessions made, then retracted
But the version that appeared in committee this week was stripped of the essential benefits. The bill would mandate that plans could not deny coverage to people with pre-existing conditions, but does not limit the premiums that could be charged to those people.
The legislation also allows for plans covering as little as 60 percent of actuarial value, which means that patients could be on the hook for as much as 40 percent of the cost of care.
SB 86 does mandate the insurance issuer to reserve the equivalent of one monthâ€™s premiums. This speaks to a problem that dogged similar plans created in the 1990s. Back then, some insurers lacked enough money to pay claims and went under, leaving patients on the hook for sometimes enormous bills.
By comparison, larger insurers in North Carolina are required to have at least three monthsâ€™ worth of premiums in reserve.
The plans also donâ€™t expressly forbid the creation of lifetime caps on coverage, something that concerns organizations advocating for people with chronic conditions, like Oâ€™Connell of the March of Dimes.
â€œPeople think theyâ€™re getting insurance that they may not be getting or theyâ€™re getting a huge deductible which will be a terrible surprise or keep them from actually using their insurance until it becomes a crisis,â€� she said. She worries that AHPs would return the insurance market back to the â€œbad old days before the ACA.â€�
â€œIf you were in a group plan, you hopefully got a good insurance policy, but if you were out there on your own, you could buy something you thought would be wonderful, like some people buy cancer policies and they think theyâ€™re covered for everything and theyâ€™re not,â€� she said. â€œThis is really going to put the onus on people who join these association health plans to make sure theyâ€™re getting something thatâ€™s good for them.â€�
Oâ€™Connell has a unique perspective on AHPs going beyond her role as a lobbyist. Sheâ€™s also the widow of former state insurance commissioner Jim Long.
â€œJim did not like association health plans unless they were well regulated,â€� she said.
All about the premiums
But for many workers who canâ€™t find insurance currently, the need for some sort of coverage is approaching a level of desperation, as premiums continue to grow.
â€œThe pain point for consumers is the premium,â€� said Hughes Waren, a leader of the NC Association of Health Underwriters, a brokersâ€™ organization.
In particular, for many higher-income earners, plans available either in the individual health insurance market or on the exchanges created by the Affordable Care Act are increasingly out of reach. Those premiums are painful enough that many folks arenâ€™t thinking too far beyond them to copays and deductibles.
Under the ACA, people earning between 138 and 400 percent of the federal poverty level (between $17,236 to $49,960 for individuals and between $25,750 and $103,000 for a family of four) receive federal subsidies to pay their premiums that diminish as their incomes grow. Those people earning more than $49,960 end up paying the premiums in full.
â€œPeople who donâ€™t qualify for advanced premium tax credits in the marketplace and who donâ€™t qualify for employer coverage because theyâ€™re sole proprietors, maybe theyâ€™re a 1099 [filer], they donâ€™t have access to where their employer is sharing in the cost. Itâ€™s all about the premium,â€� Waren said.
He argued, though, that the associations that would create these plans have an incentive to create robust plans, with decent benefits, especially because theyâ€™re creating plans for higher-income workers.
â€œI would have no reason to think that anybody is doing these to offer skinny plans. Itâ€™s really to provide a benefit to their members,â€� he argued. â€œTheyâ€™re going to create competitive plans that are attractive.â€�
He also pointed out that once an employer is permitted to pay for plans, this becomes non-taxable income.
â€œThis is targeted to folks who donâ€™t qualify for advanced premium tax credits in the [ACA] marketplace, people whose incomes are over 400 percent of the poverty level and cannot get premium assistance,â€� Waren said.
Path forward uncertain
Passage of this bill and its appearance on the governorâ€™s desk could be a largely Pyrrhic victory for proponents as the federal standards are currently tied up in court.
After Trump signed his executive order, the measure then went to the U.S. Department of Labor to issue guidelines for creating the plans, which were released in fall 2018.
Even before the DOL ruled, Trumpâ€™s AHPs were contested in a court case filed by more than a dozen statesâ€™ attorneys general, which argued that the AHPs contravened standing federal law. In March of this year, a federal district judge found the new DOLâ€™s rule â€œdoes violenceâ€� to standing law and sent the rules back to the agency to reconcile it with what Congress has ordered in the past.
The bill passed the state House with a bipartisan majority large enough to override a veto, but at the time of writing, Cooperâ€™s office declined to signal the governorâ€™s intent.
Correction: This story originally referred to Wendy Harris as Wendy Harrison.