Associated Health Plans
Many people look to association health plans (AHPs) as a way to purchase health coverage when they do not qualify for job-based group coverage. They are an alternative to individual policies. On the surface, they sound like a great idea - as a member of the association, you are part of a group that can negotiate lower premiums than are available in the individual insurance market. But AHPs are not group insurance plans - and therefore do not have to respect the consumer rights and protections that apply in the group market.
What is an AHP?
An association health plan is health insurance coverage that is offered to members of an association. The association must exist for some other purpose than to sell insurance. For example, the National Association for the Self-Employed is an association that offers a variety of discounts and benefits to its members - and one of these benefits is the opportunity to buy health insurance coverage.
AHPs are also marketed to small business owners as a great way to help these small businesses offer health insurance coverage to their employees.
However, consumer advocates warn that these plans do not offer the same protections as conventional insurance plans and therefore can lead unwary consumers to financial ruin.
What do I need to know before buying into an AHP?
Consumers should be aware that association health plans are not the same as group health insurance plans. Group plans are subject to regulations that ensure that all members of the group are charged the same premium, and that premium rates will remain relatively stable from year-to-year. Most group plans are also subject to state regulations that mandate coverage for specific diseases or conditions, such as diabetes self-management training or mastectomies.
In contrast, AHPs are not required to offer the same premium rate to each member. It is also legal for them to dramatically raise premium rates from year-to-year, to the point where consumers are "priced out" of the plan. Also, AHPs are not subject to state regulations mandating coverage for specific diseases or conditions.
However, they also result in higher premium rates. This is the big advantage of AHPs - because they do not have to follow as many rules or cover as many specific diseases or conditions, they can offer cheaper insurance coverage.
AHPs are not all bad. Some consumers enjoy the fact that it is easier to qualify for AHPs than individual insurance policies, and of course, lower premium rates make everyone happy. But it is important to be aware of what you are getting into before you buy. Some AHPs offer quality insurance coverage, while others may engage in fraudulent or deceptive behavior - and because of the relaxed regulation of AHPs, it's extremely difficult to tell which kind of plan you are buying into.
Here are some critical questions you may want to ask before buying into an AHP:
- When can premiums be increased? How much can they increase?
- How much does the plan have in cash reserves to pay claims?
- Has the plan ever been sued for failure to pay a claim?
- Is COBRA continuation coverage available to members of the plan?
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