President Trump recently stated he may issue an executive order to allow individuals to purchase insurance coverage across state lines and through associations. As with any other healthcare regulation, there will be financial winners and losers with these new proposed concepts. If implemented, employers need to understand potential impacts and ways to either benefit from, or minimize, their risk.
Currently, Employee Retirement Income Security Act (ERISA) regulations require association insurance plans members to be from a similar industry type. For example, physician practices can currently join the North Carolina Medical Society Health Benefit Plan, or law firms can join the North Carolina Bar Association Medical Insurance Plan. Additionally, ERISA regulations review other factors to determine what a “bona fide group” or “association of employers” is for the purposes of offering an insurance plan. These factors include:
- how the association solicits members
- who is entitled to participate and who actually participates in the association
- the process by which the association was formed
- the association's purposes outside of providing insurance
- the relationship of its members outside the organization
- the powers, rights, and privileges that a member enjoys as a result of joining the association
If the ERISA regulations are relaxed, more association insurance plans may be implemented – especially targeting those industries or associations employing a younger and healthier population. The healthier demographics will lead to lower association medical insurance premiums and may provide a significant benefit for those participants. Conversely, the remaining risk pool will experience increased losses once the healthier population is syphoned off. This adverse selection in the group market would lead to higher premiums for those remaining in the non-association risk pool.
As an employer, it is important to understand your options and their impact on your group medical insurance plan. If you have questions about association plans or are interested in other ways to finance your medical plan, please contact a consultant at HCW.