What Are Association Health Plans ?
Association Health Plans (AHPs) are routinely in the news – nationally and regionally — as employers look for ways to save on employees’ health care. But something California employers need to know is that new AHPs are not allowed in the Golden State. We’ll take a look at why, and what alternatives are available. But first, it’s helpful to understand the history.
Associated Health Plans (AHPs) are group health insurance plans that allow small businesses, self-employed individuals, and associations to band together to purchase healthcare coverage. By pooling resources, AHPs can make it easier for participants to access more affordable insurance options. These plans are particularly attractive for industries or groups seeking flexibility and cost savings.
| AHP Feature | What It Means for Business Owners |
|---|---|
| What Are AHPs? | Group health insurance plans letting small businesses, self-employed individuals, and associations join forces to purchase healthcare coverage. |
| How They Work | By pooling resources, businesses and individuals gain access to more affordable insurance options. AHPs use the collective power of groups to negotiate better coverage rates. |
| Key Benefits | – Cost Savings: Lower premiums compared to standalone plans. – Flexibility: Tailor coverage to your team’s needs. – Group Advantage: Strength in numbers means access to plans that feel like “big company” perks. |
| Who It’s For | Small businesses, sole proprietors, or industry-specific groups looking for affordable and flexible healthcare options. |
| California Caveat | Sorry, California employers! New AHPs are not currently allowed in the state. But don’t worry, there are alternatives like public exchanges or working directly with brokers to find tailored coverage. |
| Why Businesses Love AHPs | A cost-friendly, collaborative approach to health insurance that makes employees happier and keeps budgets in check. |
Here’s a deeper look into AHPs and their relevance to businesses:
The Newest Definition of Associated Health Plans (AHPs)
AHPs were redefined in the past decade to expand their eligibility and access. Here are some key points for business owners to be aware of:
- AHPs allow small businesses and self-employed individuals (like sole proprietors) to join larger insurance groups, increasing their purchasing power.
- Partners in partnerships, as well as their spouses, can also qualify for coverage through AHPs.
- The rules were updated to help bypass some Affordable Care Act (ACA) requirements, such as the need to include the 10 Essential Health Benefits (EHBs), which can otherwise make insurance more costly for smaller entities.
Which Businesses Are Likely to Use AHPs?
AHPs work particularly well for certain industries and situations. Here are some business who might benefit the most from AHPs:
- Small Businesses: Retail shops, local restaurants, and family-run operations can use AHPs to access coverage that mirrors what larger corporations provide.
- Industry-Specific Associations: Groups like trade organizations for real estate agents or service contractors often use AHPs to offer members a unified and cost-effective health plan.
- Self-Employed Professionals: Freelancers, consultants, and independent contractors who lack traditional company-sponsored insurance may find AHPs an attractive alternative.
Benefits of AHPs for Employers
AHPs offer several compelling advantages for businesses looking to simplify health benefits management while saving costs:
- Cost Savings: By pooling risks with other businesses or self-employed members, employers may access lower premiums compared to standalone small-group plans.
- Flexibility in Plan Design: AHPs often allow employers to customize plans to meet their employees’ unique needs, sometimes offering more choice than traditional small-group plans.
- Administrative Simplicity: For small businesses, joining an AHP can streamline some of the typical administrative delays and reduce the burden of managing health plans independently.
Benefits of AHPs for Employees
Employees also see multiple advantages when their employer opts for an AHP:
- Access to Group Rates: Employees can benefit from more competitive premiums typically only available in larger group insurance plans.
- Broader Networks: AHPs sometimes include wider networks of providers, offering employees better access to doctors and specialists.
- Potential for Tailored Plans: Employees may find AHP policies more aligned with their coverage needs, which could include wellness initiatives or specialty services that may not be offered by more traditional plans.
Considerations for Employers
While AHPs are a practical option for many, they do come with some considerations, such as:
- Fewer ACA Protections: AHPs are not required to cover all ACA Essential Health Benefits, which could affect coverage options in areas like maternity care or mental health services.
- Regulatory Differences: Rules about AHPs can vary by state, so employers will need to ensure compliance with local laws. As we mentioned, AHPs are not currently available in California.
AHPs represent a cost-sensitive, flexible way for small businesses and self-employed individuals to offer health insurance that’s valuable to both employers and employees. When evaluated alongside other health plan options, they can be a strategic choice for groups looking to maximize benefits without inflating costs.
Alternatives for California Employers
While AHPs are generally not available in California, there are other options to consider. You can go directly to an insurance company and ask for a quote. You can shop for coverage through the public exchange, Covered California for Small Business. You can also engage a broker offering a range of plans from different insurers and administrators. That includes the CaliforniaChoice small business exchange with coverage from eight different health plans.
This Chart Breaks Down Key Features of Association Health Plans
| Feature/Aspect | Association Health Plans (AHPs) |
|---|---|
| Key Features | – Allows small businesses, self-employed individuals, and associations to group together to purchase healthcare coverage. |
| – Pools resources to provide affordable insurance options. | |
| – May bypass some ACA requirements, such as covering all 10 Essential Health Benefits (EHBs). | |
| – Partners and their spouses can qualify for coverage. | |
| Benefits for Employers | – Cost Savings: Access to lower premiums through pooled risk and increased purchasing power. |
| – Flexibility: Plans can often be customized to fit the unique needs of a business or industry. | |
| – Simplified Management: Reduces administrative tasks and delays for small businesses managing their own health benefits. | |
| Benefits for Employees | – Competitive Group Rates: Enjoy lower premiums similar to those offered by large corporations. |
| – Broader Networks: May gain access to more extensive provider networks for better healthcare choices. | |
| – Tailored Plans: Coverage options designed to meet employees’ specific needs, including wellness or specialty services. | |
| Typical Use Cases | – Small Businesses: Retail shops, family-owned operations, and local restaurants looking for affordable group health options. |
| – Industry-Specific Associations: Trade groups for professions like real estate agents or contractors coordinating member benefits. | |
| – Self-Employed Professionals: Freelancers, consultants, and other independents seeking cost-effective coverage alternatives. | |
| Considerations | – Reduced ACA Protections: Coverage may not include mandatory EHBs such as mental health or maternity services. |
| – Regulatory Complexity: Varies by state; for example, AHPs are not permitted in California. | |
| – Limited Availability: Employers in restricted states will need to explore alternative options, like public exchanges or brokers. | |
| Alternatives for CA | – Exchange Options: Covered California for Small Business. |
| – Direct Purchase: Quotes from private insurance companies. | |
| – Brokers/Small Business Exchanges: Access to multiple insurer options through simplified platforms such as CaliforniaChoice. |
Talk With a Broker to Learn More
If you’re interested in knowing more about AHP prohibitions in California, talk with a broker. Your broker can help you compare different employee benefit programs that are available to your business. That will help ensure you get the most value for your benefits dollars. If you don’t already have a broker, we make it easy to connect with a California agent.
