Impact of Association/Short-Term Health Plans on States and Consumers Commonwealth Fund Briefing

Introduction Sara Collins, Ph.D. Vice President, Health Care Coverage and Access The Commonwealth Fund Commonwealth Fund Briefing

Implementing The Presidential Executive Order Association Health Plans A framework to increase risk of fraud, insolvency and market instability January 25, 2018 Kevin Lucia, J.D., M.H.P. 3

Presidential Executive Order October, 2017 Expand the availability of and access to alternatives to ACA-compliant insurance Short-Term Limited Durational Plans (STLDPs) Proposed Regulations at OMB Association Health Plans (AHPs) Proposed Regulations Released January 5, 2018 Health Reimbursement Arrangements (HRAs) Augmented by loss of the individual mandate 4

Short-Term Limited Durational Plans Executive Order Proposed regulations expected anytime Expand availability of STLDPs Longer duration, renewable Exempt from ACA market rules States have few, if any, standards for STLDPs Implications Ability to cherry-pick healthy individuals Destabilizes regulated individual market States may closely regulate STLDPs 5

Association Health Plans Executive Order Allow individuals and small employers to purchase health insurance across state lines through professional or trade associations. History Proposal repeatedly defeated in Congress Rejected by a broad spectrum of stakeholders, including the National Association of Insurance Commissioners History of fraud, insolvency and market instability 6

Association Health Plans Under Proposed Regulation, AHPs can: Form for the sole purpose of offering health insurance Form without any common interest beyond shared industry or shared location Cover members of all sizes, including self-employed individuals and sole proprietors (“working owners”) Be considered “large group” coverage under federal law Not comply with critical market rules and consumer protections, including coverage of EHB Charge higher rates, beyond those permissible under the ACA, based on factors such as age, gender, occupation, and group size No “health status” of member groups to determine eligibility, premiums, or benefits 7

Association Health Plans Regulatory Takeaways Easy to Form Easy to expand across state lines Uneven playing field between AHP and ACA compliant markets Open questions on continued scope of state authority 8

Association Health Plans Risks Increased Risk of: Fraud Insolvency Market Segmentation 9

Association Health Plans Critical Question Limiting state authority increases risk of AHP fraud, insolvency and market instability Questions To what extent can states regulate AHPs without being inconsistent with the proposed federal framework for AHPs? In the future, will federal regulators exempt certain AHPs from much of state authority? 10

Thank you! 11 Kevin Lucia, J.D., M.H.P. Research Professor Georgetown University Center on Health Insurance Reforms kwl@georgetown.edu 202-687-4928 11

DC Health Benefit Exchange Authority Mila Kofman, Executive Director Commonwealth Fund draft

Proposed U.S. Dep’t of Labor Rule and Request for Information: Association Health Plans (AHPs) Many efforts by the Administration to destabilize the ACA through Administrative actions. In all areas states can take action to keep their markets stable and affordable. EXCEPTION: proposal on AHPs Proposal on AHPs: preemption of states (at best not clear and will have to be litigated). U.S. Dep’t of Labor reinterpreted ERISA (setting aside 45 years of guidance). ERISA (Employee Retirement Income Security Act of 1974) applies to pension and health plans offered by private employers. Restricts state oversight and state standards.

New ERISA ambiguity opens the door to scams. AHP Proposal Consequences: Opens door to fraud and scams, insolvencies, and market collapse New ERISA ambiguity opens the door to scams. Long history of criminals using ERISA as a shield to evade state law collect premium for fake insurance and leave small businesses and individuals with millions in unpaid medical bills. (last cycle of scams: more than $250 million in unpaid medical bills) fake Unions, fake associations; Promoters challenge state actions arguing ERISA preempts states Victims: real associations, small businesses and self-employed people

U.S. Dep’t of Labor cannot protect businesses and individuals: State insurance regulators: prevent, quickly find, and quickly shut down scams (licensing, on the ground, and broad authority) U.S. Dep’t of Labor: can’t prevent, can’t find quickly, and can’t shut down a scam quickly Look at plans once every 300 years (Olena Berg testimony) Cease and Desist (C&D) authority under ACA used once (Nov 2017) -- C&D authority is similar to state authority to shut down a scam without going to court. Nov 2017 action: went to court, delay means additional victims being scammed and assets continue to be depleted (58% to 85% of premium was paid for admin expenses; $26m left in unpaid medical bills) Registration requirement for AHPs called Form M1 – no evidence of actual review (2004 Georgetown study; 2012 Deloitte study); incorrect or incomplete registrations; $1000/day fine

Christopher Koller President

Value of Association Health Plans for Employers is Perceived Choice and Control AHP’s can only offer lower costs if They offer fewer benefits They take the younger, healthier patients from the general risk pool No “group purchasing power” for medical services AHPs do generate revenue for the broker/aggregator 9/18/2018

AHP rules will lead to variety of enforcement stances by State DOIs - So long as no Federal pre-emption, some states will aggressively enforce and oversee AHPs, as in pre-ACA era: Marketing rules, membership rules, out of state oversight, certification. (see WA) Others will not actively enforce. Compare to original construct of ACA where state oversight was done within federal framework. 9/18/2018

As Result – Insurance Stability and Consumer Protections will Vary Risks - Loss of healthy people from risk pool - Fraud and insolvency of AHP - Consumer information/benefits disclosure - Complaints and investigations. These risks increase if federal pre-emption granted to AHP’s - enforcement reverts to USDOL: which acknowledges it does not the resources for the work 9/18/2018