The Senate has overwhelmingly passed Senate Bill 86, which could make high-quality, affordable health care insurance available to tens of thousands of North Carolina residents lacking coverage.
The bill enables the growth of Association Health Plans, designed for small businesses and individuals unable to afford insurance. The plans allow individuals and business owners to cluster under one plan as if they were a single employer. With increased size the associations can negotiate discounted insurance rates. The National Conference of State Legislatures issued a report showing small businesses pay between 8 and 18 percent more than large businesses for the same health plan.
The plans face criticism from backers of the Affordable Care Act. They see AHPs as a political ploy to undermine the subsidy-reliant federal insurance law, even if AHPs make private insurance a better option for many independent contractors, entrepreneurs, and employees in small businesses.
The Senate passed the Small Business Healthcare Act 38-8 without debate Thursday, March 14. Eleven Democrats voted with Republicans. The measure heads to the House.
Sens. Ralph Hise, R-Mitchell; Dan Bishop, R-Mecklenburg; Joyce Krawiec, R-Forsyth; and Chuck Edwards, R-Henderson, are primary sponsors of the bill, which modifies current laws and sections of the state insurance code to align with new federal guidelines.
A 2018 U.S. Department of Labor rule change peeled away layers of insurance regulation hindering AHPs. Expansion of AHPs could enable up to 11 million workers nationwide to purchase lower-cost, higher-quality health insurance.
Some research suggests the federal rule change makes it possible for 110,000 sole proprietors, self-employed workers, and small shop employees in North Carolina to join AHPs.
North Carolina has five Multiple Employer Welfare Arrangements, the state’s name for AHPs. They incorporate 2,139 businesses employing 14,840 workers, and provide health coverage to 28,781 people, according to the N.C. Department of Insurance.
Insurance Department attorney Bobby Croom said North Carolina businesses are showing heightened interest in creating AHPs since the federal rule change and President Donald Trump’s 2017 executive order easing restrictions.
An AHP can be a regional or multi-state operation. It can be self-insured, meaning the member employers assume payment risk for all medical claims, or they can be fully insured through a third-party insurance company.
But opening the playing field to AHPs has become a donnybrook. The Trump administration rule change chips away at some of Obamacare’s costliest, most restrictive provisions. Many Obamacare supporters and those who benefit from its heavily subsidized health insurance exchanges view Trump’s rule as a political act rather than reform in the public interest, one expert says.
“There are people who are supporters of the Affordable Care Act who have worries about people migrating out of Affordable Care Act plans into Association Health Plans, and then making the risk pools less attractive in the Affordable Care Act,” says health care expert Kev Coleman. As AHPs become more popular, Obamacare supporters fear the government insurance program could collapse.
Coleman, founder and president of Nashville, Tennessee-based AssociationHealthPlans.com, an online resource, said states have more than 1,000 rules governing AHPs. Some might trump the federal rule change and need to be changed.
“This bill would put small businesses on a more level playing field with large companies, making it possible for them to offer more attractive benefits packages to recruit the best and brightest talent,” Krawiec said when the bill was introduced.
Insurers worry about the financial stability of AHPs, and disruption they might cause to other insurance markets.
Croom said North Carolina requires self-funded AHPs to be licensed. They are subject to department regulation similar to insurance companies. Fully insured AHPs are not licensed or regulated by the department, but the insurers who provide their member benefits are.
Regulators and insurance companies urge a cautious approach to expanding AHPs, citing their checkered past.
“We haven’t had many recent problems with the current self-funded MEWAs,” Croom said. “But historically there have been a lot of issues with MEWAs, primarily with self-funded MEWAs being able to remain solvent, and having enough money to pay claims. And then there was a lot of fraud associated with health benefit plans.”
Coleman thinks the state’s experience with AHPs has led to better regulation, making the time ripe to expand them. He said modest estimates project enrollee premiums as high as $14 billion to $18 billion by 2022.
Coleman says that experience should attract insurance companies, brokers, benefits consultants, third-party administrators, actuarial experts, and others to the emerging market. His research shows 28 AHPs recently opened in 13 states, and six more are poised to launch. Most of them were regional plans, and four out of five of those were sponsored by chambers of commerce.
“From the insurers, to the small businesses, to members of the General Assembly, we’re having discussions and dialogue that’s very encouraging,” said Gary Salamido, acting president and chief operating officer of the N.C. Chamber, which supports growth of the alternative insurance plans.