By Mark Tosczak
If everything goes as N.C. Farm Bureau Mutual Insurance President Larry Wooten hopes, this time next year North Carolina farmers and others who work for agricultural businesses could have another health insurance choice: AgCareFirst.
Eligible businesses would pay at least 50 percent of the monthly premiums and covered employees the remaining balance. Wooten says the Raleigh-based nonprofit insurer, which is owned by its members, has sold Blue Cross Blue Shield of North Carolina health plans to members for years.
“We’ve had people calling, crying,” Wooten says. “They’re making decisions on whether they pay a mortgage, almost, or whether they pay health insurance. That’s how bad it is. It’s just terrible.”
Right now, the federal government is revising rules that govern association health plans. AgCareFirst will only launch if those rules allow the company to charge different premiums to different employers, depending on the health status and other differences among employees — a process called “underwriting.”
“If we can’t underwrite, then it won’t work for us,” Wooten said.
Arguments over proposed rules
Underwriting used to be common practice, one that made it harder for people with pre-existing conditions, or who had greater risks for disease, to get insurance. The Affordable Care Act eliminated that for many people, because the law largely eliminated underwriting, instead guaranteeing that people with pre-existing conditions could get insurance.
The U.S. Department of Labor hasn’t issued final regulations yet. But earlier this year, during a public comment period on the association health plans, at least a dozen organizations and individuals with North Carolina ties submitted public comments on the draft regulations.
Supporters argue the plans will allow small businesses to band together, increasing their purchasing clout so they can negotiate better prices for drugs and health care services.
But Mark Hall, director of the Health Law and Policy Program at Wake Forest University, submitted comments disputing the notion that the plans can reduce costs.
“There is no credible published evidence that pooled purchasing arrangements, including AHPs themselves (which have long existed), have been able to do so,” he wrote in comments submitted to the federal government. “All of the published evidence is to the contrary – documenting that they have not been able to reduce underlying administrative or medical costs.”
Critics also say such association plans might reduce premiums by cutting benefits, leaving people with less protection than they expect from a health insurance plan in the event of a serious medical issue. And, they argue, association health plans could weaken existing small group insurance plans and plans sold on the insurance exchanges created by the ACA, ultimately driving up premiums for the people still covered by them.
The Farm Bureau’s request to charge different employers different premiums depending on the health status of their employees and dependents may be critical to its ability to offer a plan. But others say that’s a bad idea.
‘Be particularly skeptical’
“The ability to reintroduce medical underwriting is really troubling,” said Robert Seehausen, senior vice president at Winston-Salem-based Novant Health.
Seehausen and others are worried that new regulations could permit association health plans that don’t provide the same basic benefits as other health coverage currently required under the ACA, such as maternity care. They also worry about plans that won’t provide enough coverage for serious medical issues.
“Before the ACA and some of the standardization that came with it, there was a whole category of insurance called mini-meds,” Seehausen said. “We had way too many examples where our financial assistance counselors were the ones educating consumers about their benefits and how little they were really covered.”
For employees who want to be sure they don’t end up with an unexpected hospital bill, “Consumers are going to have to be particularly skeptical and kick the tires hard on the provider networks on the benefits,” Seehausen said.
Cherry-picking cheaper members
The other main threat that skeptics see from these association health plans are their potential to lure younger, healthier people away from ACA exchange plans as well as, perhaps, small-group insurance plans, which are often used by small businesses.[sponsor]
Those plans, under the ACA, are only able to vary rates between individuals based on age and tobacco use — and even then, only within limits. Other factors, such as gender, past medical claims or health status, can’t be used to set rates.
So if younger, healthier people sign up for an association plan instead of a small group plan or an ACA exchange plan, the people who are left behind are likelier to be sicker on average and more expensive to take care of.
“That means higher premiums,” said Brendan Riley, a health policy analyst at the liberal-leaning N.C. Justice Center.
“Ultimately, we see the move to proliferate association health plans as really being designed to get more people into bare-bones coverage,” he said. “There’s nothing here that’s addressing the actual fundamental cost of care.”
Existing associations concerned
Though there are both critics and supporters of the proposal to expand association health plans, some of North Carolina’s existing association health plans are worried about what the changes might mean for them.
Several groups, including the N.C. Medical Society, the N.C. Bar Association and the N.C. Bankers Association, filed or signed on to statements addressing the proposed rules.
The Medical Society, whose association health plan covers more than 17,000 employees and dependents across almost 500 medical practices, is worried that some parts of the new federal rules would conflict with the existing federal and state rules it’s governed under.
“The NCMS Trust and other established [multi-employer welfare associations] could be required to make substantial operational and systems modifications that impact our covered employees and dependents,” Steven Sawyer, senior vice president of corporate administration at the N.C. Medical Society Employee Benefit Trust, wrote in comments to the U.S. Department of Labor, which oversees association health plans at the federal level.
Instead, Sawyer said, existing association health plans should be shielded from having to comply with new rules that conflict with current regulations.
Blue Cross and Blue Shield of North Carolina, which administers the Medical Society plan and which is in talks with the Farm Bureau to manage AgCareFirst, also filed public comments. Like the Medical Society, Blue Cross believes that requiring existing association health plans to follow ACA-style rules, where all employers have the same premium levels regardless of the health conditions of their employees, would be disruptive to existing association health plans, which don’t have to follow that rule now.
If Uncle Sam does give association health plans more flexibility in how they set premiums and medical benefits in their plans, they’ll still have to persuade people to sign up for them. And they’ll have to convince doctors and hospitals to take the insurance, which could be a heavy lift.
And if the new federal rules allow association health plans to offer fewer benefits than other health insurance plans, Novant’s Seehausen said, “we’re going to have to be very careful, as a health system, which of these plans we do business with.”