Nevada Wades Into National Debate About Association Health Plans

t’s history repeating itself.  Been there done that…………………..

I sent the article following this commentary to an insurance acquaintance in Reno, Nevada. Below is his response:

All of us old enough have dealt with MEWAS and Association health plans since the 80’s.  If they are fully insured they eventually all rise to high cost plans, if they are self insured AND they carve out the Rx from the Medical they can control cost better.  
If they don’t have 5,000 to 10,000 members as a minimum for buying power it’s a waste of time.  The culprits in all this are the so called “providers “ !  They put together these “ networks “ that eventually can collapse.  So if you don’t deal with the big boys like BCBS, United, Aetna etc your Risk is high and your cost eventually get high.  It’s history repeating itself.  Been there done that.  
In order for them to be successful you have to have people that are very very  experienced and knowledgeable in health care and know where all the pot holes are, and who know who the honest and transparent are !  
Those people are very few and far between.  
All the people at these associations whether a building alliance or a chamber of commerce or economic development etc etc know nothing about the REAL health care industry.  It’s like kittens wandering into a Wolf’s den. They all get eaten alive. 
Can they work ? Yes.  With a large enough number of businesses banning together ( buying power ) and very knowledgeable, honest and experienced people putting them together and running them.  

Health insurance: Nevada wades into nationwide debate about association health plans

Jason Hidalgo  |  Reno Gazette Journal 6:00 a.m. CST Nov. 23, 2018

Leveling the playing field?

Several business groups in Nevada launch their own insurance plans for members as the nationwide healthcare debate enters its latest chapter.

For many small businesses, the rising cost of insurance is akin to death and taxes. It’s one of life’s certainties.

Just ask Bob Fehling, president of Reno general engineering contractor Versa Grade. Fehling described his annual battle with insurance rates as a “painful” activity marked by diminishing returns.

“For well over a decade, we’ve been experiencing double-digit increases in our annual healthcare costs,” Fehling said. “The costs keep getting greater and greater and greater while the coverage of the plan decreases. We’re paying more for less.”

In Fehling’s case, that cost added up to about $12,000 per month to get health insurance for his company and its employees. To make things worse, Fehling felt that he was picking between the least worst plans instead of the best plans available. As a small business, Fehling says, Versa Grade does not have the large employee counts that allow major companies to get better deals for health insurance.

“Primarily, the out-of-pocket and annual deductibles were really out of line,” Fehling said. “But we stuck with our insurance because we thought it came up with the better plan among all the terrible plans.”

Fehling’s experience is not unique. For many small business owners, offering health insurance can eat up a sizable portion of their compensation, said Ann Silver, CEO of the Reno-Sparks Chamber of Commerce.

Some employers can choose to not offer health insurance. But in a tight job market where the competition for workers is fierce, small businesses do so at their own risk.

“Health insurance has been, for at least a decade, unaffordable for small employers,” Silver said. “Health insurance is such an exorbitant cost, but small businesses struggle to recruit and retain employees without it.”

With many of its small members struggling with the high cost of health insurance, the Reno-Sparks Chamber of Commerce decided to take matters into its own hands. By pooling its membership as one big bloc, the chamber says it is able to offer its own discounted insurance through a product known as an association health plan. The organization is one of six Nevada business associations that started offering their own association health plan to member companies starting this year.

Silver described their health plan as a much-needed option, especially for small businesses that are struggling to compete with bigger companies for labor. The plan is even available to other chambers of commerce for a one-time affiliation fee of $200.

“It’s a real game changer for small businesses, which are the lifeblood of the community.” Silver said. “I think it levels the playing field as they compete for skilled employees, especially with recruitment and retention being a real challenge right now.”

Staging a comeback

Support from the Trump administration has thrust association health plans back into the limelight

Association health plans involve an old insurance idea that is starting to gain ground in the last couple of years.

As the name implies, association health plans — AHPs for short — are a type of insurance that can be offered through associations or groups of small employers. Association health plans fall under a broader category of services known as multiple employer welfare arrangements, which provide members with health and welfare benefits.

The plans allow small businesses or self-employed workers within the same area or industry to join forces for health insurance purposes. The idea is that by pooling their numbers, small businesses are able to obtain more favorable rates that are typically available to larger employers.

In Nevada, there are six association health plans overseen by the state’s Division of Insurance as of Nov. 21, with one more applicant yet to be officially approved. All of the plans confirmed so far were started this year and are offered by professional groups or trade associations that represent various businesses in the state.

Although association health plans have been around for decades — their origins can be traced back to the Employee Retirement Income Security Act of 1974 — AHPs started seeing renewed interest last year after going through a decline. In March 2017, the U.S. House of Representatives passed the Small Business Health Fairness Act, which created requirements for federally certified association health plans, including certification, coverage and rates for contribution.

President Donald Trump then signed an executive order on Oct. 12, 2017 to further expand the availability of association health plans to small businesses. This was followed by a final rule on June 19 from the Department of Labor that eased the conditions required for groups to form AHPs, allowing them to be created more easily by subjecting them to fewer requirements. The Labor Department rule took effect on Sept. 1 for fully insured association health plans and will take effect in early 2019 for self-funded plans that are not tied to an established insurance carrier.

Fehling, who decided to join the Reno-Sparks Chamber Association Health Plan, called it a marked improvement over the options available to his company in the small group market. Prior to signing up Versa Grade for the AHP, Fehling was considering whether to make employees pay a larger share of the insurance costs because it was getting too expensive for him to pay the lion’s share of the benefit. After switching to the chamber plan, however, Versa Grade will be paying 14 percent less than the current plan once it takes effect. Fehling says the chamber insurance has better benefits as well.

“It has lower deductibles and lower out-of-pocket costs,” Fehling said. “It has better coverage and lower total cost all the way around.”

Checkered past

‘We’ve run this experiment before and we saw a lot of fraud and a lot of mismanagement of these types of plans.’

While proponents lauded the resurgence of association health plans, others questioned what’s truly driving renewed interest in AHPs. After all, if the model behind the plans has been around for decades, what caused it to fall out of favor in the first place?

A look at the history of association health plans reveals a checkered past marked by several instances of fraud and bankruptcy, ultimately leaving small business owners in the lurch with unpaid medical costs. A large part of the shenanigans seen with association health plans involved their exemption from more rigorous state oversight. Instead, the Department of Labor was tasked with overseeing the plans — a responsibility that the agency was ill-equipped to handle because it did not have the same depth of experience that states had with regulating insurance markets.

Between 1977 and 1982, for example, California saw a spate of AHP shutdowns, including 18 bankruptcies that left unpaid medical bills worth millions of dollars in their wake, according to reporting by Pew Charitable Trust’s Stateline.

Although Congress tried to address such issues by amending the Employee Retirement Income Security Act in 1983 and giving states more oversight, instances of fraud continued. It also created a dichotomy in enforcement that proved to be a nightmare for regulators nationwide.

“They would skate between state and federal oversight and claim they fell under the other rule when one side asked them,” said Barbara Richardson, Nevada Division of Insurance commissioner. “It happened to quite a few states, including ours.”

Between 1988 and 1991, for example, 400,000 people were saddled with $123 million in unpaid medical bills from multiple employer arrangement-type plans, according to the General Accounting Office.

Congress tried to fix the problem in 1996 by amending the law once again and giving the Department of Labor authority to require registration for such health plans. Problems, however, continued to occur. In 2004, a report by the General Accounting Office found incidents of insurance fraud related to multiple employee arrangement plans in every state — each involving entities that were not authorized to sell health benefits. The incidents occurred between 2000 and 2002 and involved 144 unique entities, with most cases occurring in Southern states. The “bogus” plans covered 200,000 employees from 15,000 small businesses, resulting in $252 million in unpaid claims.

The passage of the Affordable Care Act, also known as “Obamacare,” put another check on association health plans by requiring them to adhere to the same standards seen in the individual and small group markets. This included covering people with pre-existing conditions as well as including 10 essential health benefits such as emergency, maternal and pediatric care. The change removed a key advantage that association health plans had over traditional small group plans for lowering costs, causing several AHPs to leave the market.

The stricter regulations, however, still did not deter fraud. As recently as November 2017, the Department of Labor found one multiple employer welfare arrangement plan that had more than $26 million worth of processed yet unpaid insurance claims. The failing plan, which had 14,000 enrollees across several states, was sending money from premium contributions to offshore accounts.

The many instances of past fraud and failures involving association health plans have such groups as Small Business Majority leery about the latest push for AHPs. Small Business Majority represents a network of 58,000 small business owners as well as 1,000 business partners that include some chambers of commerce, economic development groups and workers associations.

“We’ve run this experiment before and we saw a lot of fraud and a lot of mismanagement of these types of plans,” said David Chase, vice president of national outreach for Small Business Majority. “At the end of the day, the victims were small business owners and employees. They were the ones left holding the bag the last time we went down this track.”

Political football

‘President Trump is expanding affordable health coverage options for America’s small businesses and their employees.’

With healthcare traditionally being a flashpoint between Democrats and Republicans, today’s highly divided political landscape is muddying the debate surrounding association health plans even further.

The plans, for example, have historically received pushback from states worried about the lack of oversight on AHPs. The latest example occurred in July when attorneys general from 11 states and the District of Columbia sued the Department of Labor just one month after it released its final rule on AHPs. The new rule exempts association health plans from the stricter requirements levied by the Affordable Care Act — including coverage of essential health benefits — as well as some federal and state requirements.

“The rule accomplishes this objective by permitting a broad range of associations to offer health plans that do not have to comply with various Affordable Care Act protections,” the attorneys general alleged in their lawsuit. “Through that mechanism, the rule increases the risk of fraud and harm to consumers, requires States to redirect significant enforcement resources to curb those risks, and jeopardizes state efforts to protect their residents through stronger regulation.”

Supporters of the rule change, meanwhile, described the lawsuit as a political stunt, noting that all the attorneys general involved were Democrats. Labor Secretary Alexander Acosta stressed that the changes were not about watering down safeguards but providing more choice in the market.

“President Trump is expanding affordable health coverage options for America’s small businesses and their employees,” Acosta said in a statement. “Many of our laws make healthcare coverage more expensive for small businesses than large companies. Association Health Plans are about more choice, more access, and more coverage.”

Opinions on the new rule are split not just along party lines but group interests. Although business organizations such as the National Association of Realtors and the National Retail Federation support the new rule, health groups like the American Cancer Society and the American Heart Association oppose it.

For states that now have to deal with the impact of the new rules, a big concern involves uncertainty regarding enforcement. One of President Trump’s ultimate goals with association health plans, for example, is to make it easier for businesses to buy insurance across state lines. How that potentially plays out across different states with different rules, however, remains to be seen.

“There’s a lot of ambiguity in terms of how much states can really regulate these plans because of the federal framework,” said Small Business Majority’s Chase. “If a small business owner in (another state) ends up buying an association health plan from Mississippi, how much power will that state have to regulate that (Mississippi) plan? It’s not totally clear how it’s going to work.”

Affordable Care Act’s shadow

‘The ACA has such an emphasis on individuals that it just feels like small groups were kind of forgotten.’

It was the Monday just before Thanksgiving and Sierra Nevada Door & Window in Reno was swamped.

“Today is definitely not good,” said co-owner Stacey Bollinger when asked about openings in the schedule.

While the holidays are typically a stressful time, Bollinger can cross off one issue from her checklist: health insurance. Sierra Nevada Door & Window, which has a staff of 10, just signed up for a new association health plan with the Nevada Builders Alliance. The association counts more than 800 companies among its members and decided to leverage that into an AHP of its own.

Bollinger admits that she was nervous at first because of some of the horror stories she has heard about association health plans. But the Nevada Builder’s Alliance insurance was provided through an established carrier, Prominence. It also was 30 percent cheaper than Sierra Nevada Door & Window’s current health plan, which costs about $5,000 a month.

Bollinger, who started the company with her husband Mark, says she has seen their company’s health insurance costs change significantly over the years.

“It was great when we were under 40 and we were all young,” Bollinger said. “We had amazing insurance with lower premiums back then.”

Since then, the company’s health insurance costs have tripled. Bollinger says the passage of the Affordable Care Act also came with higher increases in the cost of the insurance plans they used to choose from through the small group insurance market — something that Versa Grade owner Fehling also brought up.

The increases seem to go against reports about the Affordable Care Act’s positive impact on premium costs. Prior to the passage of the ACA, insurance premiums rose each year by an average of 10 percent from 2008 to 2010, according to a report by the Commonwealth Fund.

After the ACA’s passage, annual premium increases fell significantly, hovering between 3 percent and 5 percent.

Those figures, however, are for the individual health insurance market. For small business owners, the ACA’s mandatory requirements to cover essential health benefits and remove annual and lifetime dollar limits or caps on most benefits meant that many lower-cost insurance options also went away. These included association health plans that offered fewer benefits in exchange for lower pricing. Even the ACA’s introduction of the Small Business Health Options Program to help companies with fewer than 25 employees was not enough, according to some in the small business community.

“Before the ACA, there were several groups that had association health plans and those went away,” said Aaron West, CEO of the Nevada Builders Alliance. “The ACA has such an emphasis on individuals that it just feels like small groups were kind of forgotten.”

Debating the impact

‘When you pull out all those people, what does it do the small group market?’

West echoed comments by the Reno-Sparks Chamber of Commerce that association health plans such as theirs give small businesses the option to band together for better rates.

Chase of Small Business Majority, however, says the much-touted aspect of association health plans being able to provide better discounts by pooling businesses together is not unique to AHPs. Chase pointed out that small group insurance, the primary option for small businesses looking for health plans, uses the exact same concept. Small group insurance rates are set based on the cost of covering the entire pool of small businesses that are signed up in the state, a pool that is potentially being harmed when small businesses leave it to go to an association health plan, Chase said.

“When you pull out all those people, what does it do to the small group market?” Chase said. “Maybe (some of these AHPs) find a way to select businesses that have a younger or healthier workforce and save a few bucks because of that, but then those costs are now passed on to other businesses. You can’t support one business saving money at the expense of the business across the street.”

Others cautioned small businesses to read the fine print on AHPs and make sure they are getting the product they actually want. Not being subject to the same rules set by the Affordable Care Act comes with advantages such as greater flexibility and lower premiums, said Sally Poblete, founder of small groups benefit marketplace Wellthie. But it also comes with disadvantages, typically in the form of less coverage.

“The premium isn’t the only thing that is important for small business owners to look at,” Poblete said. “Business owners really need to understand the plan that they are looking at because they might end up buying something that they were not expecting.”

In Nevada, fully-insured AHPs get the benefit of state oversight because they are offered through traditional insurance carriers such as Prominence, Health Plan of Nevada and Hometown Health Plan. This makes them subject to state insurance law. Nevada, for example, requires carriers to be licensed in the state before they can attempt to create a fully-insured AHP. Nevada also mandates carriers to cover essential healthcare benefits and pre-existing conditions while also having no dollar limits or caps. Self-funded AHPs — which were especially prone to insolvency in the past — currently do not operate from inside the state, according to Commissioner Richardson.

While the Labor Department primarily focuses on consumer harm when regulating association health plans, Nevada’s insurance division looks at “the whole package,” Richardson added. This includes conducting financial solvency and insurance market reviews in addition to checking potential harm to consumers.

Association health plans have certainly created more than their fair share of problems in the past, Richardson said. Other states are also understandably nervous about them, she added. At the same time, Richardson believes that AHPs could have a place in Nevada’s insurance market.

“If you have a large gig economy or have a lot of small businesses, AHPs can work great,” Richardson said. “Not a lot of states are in that position but the plus for Nevada is that we have the experience. We have experience with good players and our carriers understand it because they’ve been in this business.”

“We also have a very robust and competitive small group market so I think that everything is just right for Nevada,” Richardson said.


Here’s a list of approved association health plans in Nevada from the Division of Insurance as of Nov. 21, 2018:

  • Henderson, Nevada Chamber of Commerce/Clark County Association Health Plan. This is offered through carriers Health Plan of Nevada and Sierra Health and Life.
  • Las Vegas Metro Chamber of Commerce Health Plan. The plan is offered through Rocky Mountain Hospital and Medical Services, which is doing business as Anthem Blue Cross and Blue Shield.
  • Reno-Sparks Chamber Association Health Plan. The carrier for this plan is Prominence.
  • Nevada Builders Alliance Association Health Plan. Prominence is the carrier for this plan as well.
  • Nevada Contractors Association Health Plan. Carriers are Health Plan of Nevada and Sierra Health and Life.
  • Builders Association of Northern Nevada. Hometown Health Plan is the carrier for the plan.

Jason Hidalgo covers businesstechnology and gaming for the Reno Gazette-Journal. Follow him on Twitter @jasonhidalgo. Support local journalism: RGJ digital subscription.

6:00 a.m. CST Nov. 23, 2018