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NBCH Policy Position: Association Health Plans (AHPs) - Executive Summary

The National Business Coalition on Health (NBCH) supports federal legislation that expands, standardizes and streamlines the availability of health coverage for employees of America's small employers by allowing employers to join together to buy health coverage through a variety of state and national models, including health care purchasing cooperatives and federalized Association Health Plans (AHPs). Given the unique needs of the coalitions' members, and of the individual employers that comprise each coalition's own membership, NBCH does not claim that each of its member coalitions, or their own employer-members, endorses AHPs.


This purchasing model could provide a practical way for small employers to enjoy more bargaining power, greater choice, economies of scale, and administrative efficiencies. In this way, AHPs could level the playing field and give participating small employers the advantages currently enjoyed by larger employers and unions.


Conversely, this model must be carefully considered as current AHP legislation has fundamental shortcomings which could result in discrimination against high-risk consumers, undermine otherwise healthy and competitive markets for small group insurance, or result in insufficient financial solvency or hollow benefits. These issues must be addressed to ensure that AHPs function in a manner that has a complete and positive impact on the small employer market.

AHP Benefits:

  1. Small businesses have little purchasing power and few affordable options. AHPs may make health insurance more affordable for small business through group purchasing and risk spread.

  2. AHPs could provide more choice in the health insurance market place. Legislation federalizing AHPs will provide fully-insured plan options under a uniform set of federal rules and exemption from state-based mandates.

  3. Small businesses themselves are a weak bargaining unit. Through AHPs, the smallest firms stand to save the most from AHPs because their administrative costs could decrease.

  4. Uniform federal regulation of AHPs will help small businesses lower their administrative costs because, by operating under federal law, AHPs can avoid the costs of complying with 50 different sets of state benefit mandates. In addition, AHPs that are operating on a national level will be able to receive more favorable treatment from insurers.

AHP Shortcomings:

  1. Stringent state insurance rating rules do no apply to AHPs as currently written. This allows insurance rates to be set based on the claims experience generated by each association pool rather than as part of the regular small-group rating structures required by state laws. This could result in premiums set so high that high-risk patients essentially would not have access to insurance.

  2. AHPs, in their current form, could have the ability to dominate the good risk from the current community-rated pool and result in higher utilization by state governed plans, causing their premiums to increase resulting in an unlevel playing field for state-based purchasers.

  3. Since AHP's would not be governed by state law, there is concern as to whether these plans will be properly monitored and regulated means there would be no protections against arbitrary increases, i.e. for re-insurance, copayments, or out of pocket expenses.

  4. With federal government oversight of AHPs comes a responsibility to the taxpayers to ensure qualified AHPs bring value, as well as access to both employers and consumers by obtaining the highest quality care at the most reasonable cost, i.e. Value-Based Purchasing; by measuring the comparative quality and efficiency of hospitals, physicians, and health plans in the community to identify the best value; and by creating incentives to provide higher-value care through integrated delivery systems and continuous quality improvement.