California Policy Perspectives on Association Health Plans

Emma Hoo, Purchaser Business Group on Health


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Association health plans (AHPs) are insurance arrangements that allow small businesses, associations, and self-employed workers to organize together to purchase health care coverage, potentially obtaining lower-priced coverage by spreading risk and negotiating on behalf of a larger set of enrollees. Recent federal regulatory changes have expanded the definition of AHPs to reduce the requirements and conditions under which such entities could form, while also bypassing the coverage requirements specified in the Affordable Care Act (ACA). In response, many states have issued regulations that seek to mitigate the effects that AHPs could have on other insurance products and to reinforce the consumer protections that the ACA requires.

California Policy Perspectives on Association Health Plans examines these developments and the current market for AHPs in California, including a related expansion of less-regulated professional employment organization (PEO) insurance products. Interviews with current market participants and observers suggest a potential need for additional oversight of both AHPs and PEOs. Absent such oversight, the spread of coverage products not fully compliant with the consumer protections codified by the ACA may lead to adverse risk selection and undermine the functioning of individual and small group markets both within and outside the Covered California health insurance exchange.