NH Senate bills set rules for association health plans

Republican, Democratic measures lay groundwork for more businesses to participate

Two bills in the NH Senate address association health plans, which would allow companies to band together to purchase health insurance.

One, Senate Bill 227, introduced by Sen. Jeb Bradley, R-Wolfeboro, but drawn up by the NH Insurance Department after months of stakeholder meetings, would regulate association health plans. The bill tries to strike a balance between creating more flexible plans for small groups that would allow self-insured people to participate as well, but leave enough protections for consumers, and to prevent it from draining healthy populations out of the current risk pool.

The second bill, SB 228, introduced by Senate Majority Leader Dan Feltes, D-Concord, has more consumer protections and explicitly states that a the new alternative can’t force rates up in the individual market.

The state does allow for older AHPs – known as multiple-employer welfare arrangements under New Hampshire law – but their membership has been limited to existing trade groups. The federal government and state governments clamped down on such plans and only a few grandfathered in the past remain, such the American Automobile Association’s.

But last June, the Trump Administration loosened the rules, allowing businesses that were not previously grouped together to join for the main purpose of buying insurance, based on either a common interest or a geographical area. That would allow, for instance, Uber drivers, freelance writers, various chambers of commerce, even Main Street associations to form AHPs, as long as they have at least one other business purpose as an association.

Perhaps the biggest change is that they would allow self-employed people to be included in the plans. Under current law, they would have to buy an individual policy. Both The Senate bills would open up the state law to these new AHPs.

Under the Insurance Department bill, the plans, called Pathway II, would be treated like a large group, not a small one. That would exempt them from some of the protections of small groups, but the bill would leave in place some others.

It also would allow groups to be as small as 250; under the previous law, they had to have at least 3,000 participants. Federal law allows groups as small as 100 members.

The federal law doesn’t require that large groups offer the 10 essential health benefits, such as mental health and maternity coverage. The Insurance Department bill requires them.

The bill also would require AHPs to provide an adequate network and follow the law on balance billing, preventing consumers from getting stuck for charges for ancillary hospital services that are out of network. There will also be waiting periods, so members could not switch back and forth depending on expected health bills. And the level of coverage must be equal to 60 percent of the full actuarial value of benefits.

There are some financial protections as well: a surplus requirement equal to approximately three months of premiums and $500,000 or 25 percent of the preceding 12 months of healthcare claims expenditure, five times more than current law.

Addressing ‘adverse impact’

Will this alternative attract enough healthy individuals, potentially raising rates for others? The department really isn’t sure.

“The bill as drafted does not fully address all potential risk-selection impacts on existing markets that may occur from the introduction of this new option,” according to a department overview of the bill. It said that it is currently engaged in modeling to better predict that.

Feltes’ bill – called the Small Business Health Care Reform Act of 2019 – would also allow for self-insured people to join groups of common interest, whether they be in the same line of business or same geographical area. But it wouldn’t allow a plan unless it is either part of the Affordable Care Act exchange or after the Insurance Department determines after a public hearing “that it will have no adverse impact” on rates or coverage on the exchange.

The plans would have to have at least 500 lives and would have to deposit $750,000 or a third of a year of health care expenditures.

Feltes told NH Business Review his bill also has “more provisions and safeguards than the Insurance Department plan.” That may make it harder to form a financially viable AHP, he acknowledged, “but if you have to cut benefits for those with preexisting conditions or harm the individual market to make this happen, then it shouldn’t happen.”

Meanwhile, on the House side, Rep. John Hunt, R-Rindge, is sponsoring House Bill 257, which would make associations easier to form without promulgating extra protections, though it would restrict the size to 500 lives.

“Mine is simple,” Hunt told NH Business Review. “Theirs are more sophisticated.”

Hunt’s bill, which had a hearing on Jan. 17, doesn’t have much of a chance in a Legislature controlled by Democrats.

The hearing dates for both Senate bills had not been scheduled at deadline.