Small business groups in Michigan form association health plan under federal rules

The new AHP regulations allows small employers — some of whom have faced rising premiums the past several years because of rising medical costs and greater coverage requirements — a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers, DOL said.

Fowler said small business rates have stabilized the last three years after several years of double-digit increases. Kluge said some of her members in the early 2010s had their rates go up 20 to 120 percent.

But Fowler said the association executives believe cost savings for participating TranscendAHP members could be in the 3-5 percent range during the first year.

"Five percent is a pretty big number if you are spending $100,000" on employer health insurance, he said. "There is a promise of saving more in the long-term as the plan will be (company-based) experience rated."

Kluge said the savings on health insurance could be used to hire additional employees.

In Michigan, however, average rate hikes since 2016 have been modest for small employers with 50 or fewer employees. For 2019, Crain's reported in July, average small group insurance rates are projected to drop by 0.2 percent, according to the Michigan Department of Insurance and Financial Services. DIFS said individual rate increases are only projected to rise an average of 1.4 percent.

Murphy questioned whether a larger pool of small employers could drive down premium rates in the large market.

"The fact is many, perhaps most, underwriters of large blocks of small employer health plans already use the aggregate pool already to establish underlying baseline rates," he said. "From there, current rules on rating structures, while limited compared to AHP rules, are already based on the overall group's plan designs" demographics and claims.

However, insurers could offer lower rates based on lower fixed costs of administering the risk pool, Murphy said.

Under TranscendAHP, small businesses would continue to use their licensed health agent to get price quotes and other information on the various plans offered, including health savings accounts, health reimbursement accounts that all have different levels of deductibles and coinsurance.

Companies with 50 or fewer employees may apply for coverage, including sole proprietors with no employees.

Because TranscendAHP is fully insured and not subject to some of the Affordable Care Act's mandated benefits and taxes, the new plan allows the cost of benefits to more precisely match the demographics of each business and employees.

For example, unlike ACA premium rates that are solely determined by age, location, family size and tobacco use, small businesses under AHPs will determined by individual company demographics, location of your company and the age and gender mix of covered employees. This expanded criteria for pricing benefits premium costs to be more closely tied to individual groups.

"This opens up options for small businesses to negotiate as large group as far as plan design and being able to offer us up as one buying group," Fowler said.

TranscendAHP plans cover many of ACA's 10 essential health benefits, excluding pediatric dental.

Kluge said the two business groups have put aside their competitive forces and are "doing what is best for the small business community." The partners have created a 501c6 nonprofit organization, at TranscendMichigan.org, that will allow other associations and chambers of commerce to join, Fowler said.

Billing will be conducted by the two associations' partner, AHP Management Solutions, which will work with existing company independent insurance agents to ensure smooth enrollment and monthly billing administration.

"There is a lot of interest from chambers and associations," Fowler said, adding he expects several other organizations to join forces this year. "The reality is this is about volume. It makes more sense to have one really large AHP than several smaller ones."

Lansing-based SBAM services more than 26,000 member companies in 83 Michigan counties and MichBusiness, based in Warren, serves approximately the same number. They represent approximately 7 percent of the state's 800,000 small and sole proprietor businesses.

Fester also said Blue Cross has heard from a number of chambers, associations and insurance agents about creating their own AHP.

"It is fair to say once the final rule hit, we fielded more calls. Everybody is trying to understand what it means," said Fester.

But Fester said it is unclear what might happen to the small group market if a number of AHPs are formed and large numbers of small businesses leave the small group market.

"We are extremely proud of our small group market and premium rates" in which HMO plans have declined in price by an average of 1 percent, Fester said. "We have a very favorable rating system with high retention rates."

In 2019, Blue Care Network is offering an average 1.1 percent increase in small group market with HMO products dropping 1 percent in average price. This year, small group rates increased by average of 4 percent after 2.5 percent average hike in 2017 and 1 percent increase in 2016.

"Small business groups in Michigan form association health plan under federal rules" originally appeared in Crain's Detroit Business.