House Proposal to Promote Association Health Plans Poses Risks for Insurance Markets, Consumers

While the nation is focusing on the American Health Care Act, the most recent proposal to repeal and replace the Affordable Care Act (ACA), another Republican proposal is quickly advancing through Congress. The Small Business Health Fairness Act, H.R. 1101, allows small employers to band together and buy health insurance though federally certified associations. Despite its name, the bill would have a considerable and likely detrimental impact on the private health insurance market and undermine the ability of states to protect small employers and their employees.

The concept of federally certified Association Health Plans (AHPs) is not new. AHP proposals similar to H.R. 1101 are prominently featured in many of the legislative proposals to replace the ACA. Similar versions of this legislation were defeated in the early 2000s with opposition from a broad spectrum of stakeholders. One important critic, the National Association of Insurance Commissioners (NAIC), strongly opposes federal AHP legislation, including H.R. 1101, because the approach would “strip states of the ability to protect consumers and create competitive markets.”

H.R. 1101 would encourage professional and trade associations to offer health insurance coverage to their members nationwide. Proponents suggest that AHPs will offer lower premiums to members, primarily through increased bargaining power and fewer regulatory requirements. Under the bill, AHPs would be certified by the federal government and regulated under minimal federal standards for premiums, benefits, and financial solvency.1  In general, these federal standards would be less stringent than those required of insurers under state insurance law.

While some members of AHPs may benefit, this proposal would undermine states’ ability to regulate health coverage sold to their residents and to implement local standards and protections. Ultimately, federally certified AHPs under H.R. 1101 have the potential to negatively impact consumers and health insurance markets in the following ways:

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