UnitedHealth Care (UHC) kicked-off Summer 2019 with a bang. During a webinar to their top brokers on July 1st, they made the game-changing announcement that they will introduce 9 new Association Health Plans (AHP) into the California small group marketplace (1-100 employees.)
By screening enrollees for pre-existing medical conditions and other unique features (described below); UHC will price the new association plans 8-15% below current market rates.
Federal and California state laws prohibit insurance companies from asking medical history related questions in the small group market. UHC’s association health plans offer a huge potential savings to small employers and give them a strong incentive to exchange their ACA-compliant plan for a UHC association plan. UHC AHP’s will be available August 1, 2019.
Until now, Federal and State law have prevented insurance companies from offering association health plans. The second portion of this article describes those laws.
Unique Features of UHC’s Small Group Association Health Plans
Large group plan design – UHC’s new AHP’s use a large group medical plan design. This means there are no “metallic tiers,” such as platinum, gold, silver and bronze, that exist in the ACA-compliant small group market. Also, the new plans don’t offer the 10 Essential Minimum Benefits or other aspects of ACA small group plans.
Composite Rates – ACA-compliant small group plans use age rating and each employee and dependent has a different rate based on his or her age. Not so with the UHC AHPs. The new association plans have 4-tier composite rates:
- employee & spouse;
- employee and child(ren); and,
- employee & family.
Lower rates for younger members – The ACA requires that health plans set the monthly cost (premium) of the oldest 65 years old enrollee at no more than three times the premium of the youngest adult 21-year-old. This is a 3-to-1 ratio. The new UHC association plans have a 5-to-1 ratio. This enables UHC to offer lower cost plans to younger – and likely healthier – members.
Fully-Insured, non-MEWA structure – While this may be a bit policy-wonkish, UHC’s new AHPs are unlike their currently available ACEC engineering association plan. The ACEC plan is a self-insured MEWA (Multiple Employer Welfare Arrangement.) The new association plans are fully-insured and individually underwritten.
Existing UHC groups not eligible – Existing California small employers who offer UHC medical insurance to their employees are ineligible to enroll in the new UHC AHPs. This prevents employers from replacing likely more expensive ACA-compliant coverage with lower cost AHP coverage.
All provider networks available – UHC currently offers five different provider networks to small employers and they are available with the new AHPs. The networks include:
- Select Plus (PPO);
- Core (PPO);
- Signature (HMO);
- Advantage (HMO);
- Harmony (HMO).
Employers in the new AHPs can offer every network to their employees. For example, employers can sponsor a Core network plan and allow employees to “buy up” to a Select Plus plan.
Preliminary quoting info –UHC needs this info to run a quote and issue preliminary rates:
- employer’s zip code;
- Industry (to ensure that the group’s SIC code is covered by the association);
- Group size (i.e., number of employees and dependents in a small group); and,
- The ages and gender of employees and dependents.
Final rate quote – Employer groups – with the help and guidance of a broker – must submit a detailed census with employee and dependent names, dates of birth and home zip codes to obtain final rates. UHC will then run a CURV/GRx report which describes the historic prescription medicine (Rx) usage of people in the employer group. Groups with a poor GRx score must complete individual applications and answer questions about pre-existing medical conditions. Poor health history will result in uncompetitive rates. UHC’s final rates will be non-negotiable.
Renewal rates based on utilization – New groups will have a 12-month rate guarantee. Upon renewal, UHC will examine each group’s prior year’s “utilization” or medical claims experience. UHC will set the renewal rates based on the extent that members have used their medical insurance plan.
Difficult to stand along with Kaiser – UHC allows groups to offer their AHP plans next to Kaiser and other insurance company plans. However, the Kaiser plans must have similar benefits and composite rates. Kaiser – and every other insurance company in the small group market – uses age-based rates – not composite rates. So, it’s unlikely that a small employers will be able to offer Kaiser alongside a UHC AHP plan.
Eligible Industries – UHC new AHPs target small employer groups with 5 to 99 EEs. Beginning July 8, 2019, UHC will issue quotes for two different associations:
- California Farm Bureau; and
- Electric, Gas Industry Association (EGIA).
A few weeks later United Health Care will begin quoting associations in these industries in Southern California:
- professional scientific tech;
- wholesale trade;
- private & charter schools.
In Northern California the associations will include these industries:
- professional scientific tech;
- wholesale trade;
- CA Technology Council; and
- retail trade.
UHC’s association plans are a game-changer – I expect UHC’s Association Health Plans to have a huge impact on the market for California small group medical insurance. Currently, UHC has about 4% of the small group enrollment in California, while Kaiser, Blue Shield of California, Anthem Blue Cross and Health Net share 83% of the market. UHC’s AHP’s will likely increase UHC’s share of the California small group market while reducing market share for others.
UHC’s new plans are particularly surprising because California legislators specifically prohibited association health plans in 2018 with SB 1375. UHC stated that their new AHPs meet the legal requirements of the Federal and State governments. Here’s a summary of the legal restrictions of AHP’s:
The Federal and California Legal Restrictions on Association Health Plans
Federal Law Originally prohibited many Association Health Plans (AHPs) – Two Federal laws, most commonly known by their acronyms, ERISA and the ACA, define an “employer” in such a way that they prohibit association health plans. A recent court case which litigated the legality of AHPs describes the pertinent Federal laws.
President Trump allows AHPs – In October 2017 President Trump signed Executive Order 13813 and later the U.S. Department of Labor (DOL) issued “association health plan” guidelines so that small employers can join an association and buy medical insurance as a unit. Interestingly, the DOL’s responses to questions about AHPs differ significantly from UHC’s new AHP plans, for example:
- Question: Can AHPs cherry pick plan participants or discriminate based on health factors?
Response: No. AHPs cannot cherry pick or discriminate based on health or prior conditions.
- Question: Can AHPs vary premiums based on health factors?
Response: No. AHPs will not be able to charge different premiums to employees based on their health status. Additionally, AHPs under this rule will not be able to charge employers different rates based on the health status of their employees.
US District Court prohibits AHPs – The State of New York and 11 other states and the District of Columbia filed suit against the US Department of Labor to prevent AHPs in State of New York et al v. United States Department of Labor et al, No. 1:2018cv01747 – Document 79 (D.D.C. 2019). On March 28, 2019 the U.S. District Court for the District of Columbia issued an opinion and sided with the states and ruled that the DOL’s AHP rules violated existing law.
California prohibits AHPs – California policy makers feared that association plans would weaken California’s strong market for small businesses medical insurance by siphoning away many of the healthy employer groups and leaving employers with high medical claims in the ACA-compliant market. They reasoned that if groups with mostly high medical usage remain in the small group market that the rates would skyrocket. Accordingly, California legislators countered the President’s order by forbidding association plans with SB 1375.
UnitedHealth Care’s new Association Health Plans are sure to disrupt the California small group health insurance market. Let the fireworks begin!