Association health plans could spark 4.3 million people to drop ACA coverage

As many as 4.3 million people are projected to leave the individual and small group insurance markets to enroll in association health plans over the next five years if the Trump administration's recent proposal to expand those plans is approved, according to a new analysis.

As healthy, young people switch to association plans, premiums in the ACA individual and small group would rise as much as 4% between 2018 and 2022, according to healthcare consulting firm Avalere Health. Because of those premium increases, Avalere projected that another 130,000 to 140,000 people would become uninsured in five years, compared to current law. The study was funded by insurance industry lobbying group America's Health Insurance Plans, but Avalere said it maintained full editorial control.

The Trump administration in early January proposed a rule that would allow more small businesses and self-employed workers to band together to buy insurance under association health plans.

The rule is part of the administration's push to create more affordable health insurance options for consumers, but many health policy experts have argued that association plans, which are not required to offer the same benefits and consumer protections as ACA-compliant plans, could harm the individual and small group markets.

The Avalere study released Wednesday backs up those concerns, concluding that while association health plans may lower premiums for younger, healthier people, it could boost premiums for others and destabilize the ACA markets.

"Changes that allow or incentivize healthier individuals to exit the individual and small group market to pursue other, sometimes non-ACA-compliant coverage offerings, could lead to higher costs for those sicker, less healthy individuals and groups who remain behind in the ACA regulated markets," the study said.

Depending on the availability and generosity of association health plans over the next five years, Avalere projected between 2.4 million and 4.3 million people would shift to association plans from the individual and small group markets by 2022.

Between 1.7 million and 3.2 million people would exit the small group market, while 700,000 to 1.2 million people would leave the individual market and go to association health plans by 2022, Avalere said.

Many of those people are likely to be younger and healthier with lower medical costs. Premiums would rise between 2.7% to 4% in the individual market and 0.1% to 1.9% in the small group market relative to current law, with fewer healthy members to balance out the cost of the sicker, older enrollees, Avalere said.

Association health plan annual premiums would likely be $1,900 to $4,100 lower than those in the small group market, and $8,700 to $10,800 lower than in the individual market by 2022, depending on the benefits an association health plan offers.

The study also said that of the 130,000 to 140,000 people who would become uninsured under the proposed rule, 80% would come from the individual market.

The study doesn't look at the Trump administration's proposed rule to expand access to short-term health plans that don't offer consumer protections required by the ACA. Experts say those plans, which could last up to 12 months, compared to a maximum of less than three months under current law, would further siphon healthy people away from the individual and small group markets.