Lack of clarity from federal, state policymakers raises cost, limits effectiveness

HEALTH INSURANCE

As New Hampshire’s small businesses contemplate what the post-pandemic economic environment will bring for them, one concern remains constant: health insurance costs.

Not only is health coverage important for the well-being of Granite Staters, it is a critical component in attracting and retaining a workforce. While New Hampshire has begun to see premiums decrease in some markets, the fact remains that health insurance costs are tough on small employers.

One frequent question we receive is whether association health plans (AHPs) or multiple employer welfare arrangements (MEWAs) are a viable alternative to the small group market. Both concepts have been around for many years, but neither offers the relief that employers are seeking. Why is that the case?

Put simply, AHPs are a type of group health insurance for employers that allow smaller companies to access the health insurance savings associated with large group coverage.

In 2018, the Trump administration promulgated a new rule that made it easier for employers to form an AHP based on a shared profession, line of business, or geographical region. Further, it expanded the definition of “employer” to include unrelated employers.

By allowing these newly eligible individuals to group together in a self-funded health plan, it allowed them to have a sufficient number of employees to operate like a large employer that does not have to meet state mandates, some state regulations and some burdensome Affordable Care Act requirements. For the first time, AHPs were a viable cost-effective alternative.

That year, the New Hampshire Insurance Department hosted stakeholder meetings to assist them in finding the right balance between creating more cost-effective plans while preserving the current small group market and consumer protections. The opportunity also produced bipartisan agreement between Gov. Chris Sununu and the Democratically controlled Legislature to adopt an AHP statute.

However, shortly thereafter a federal court blocked the new rule and the Biden administration has put the appeal of that ruling in abeyance. As a result, while the state is not prohibited from allowing AHPs, they must meet all state and federal requirements.

While AHPs are currently unable to provide the relief employers are seeking, what about MEWAs?

Similar to AHPs, MEWAs are available to any group of employers, including self-employed individuals. Over the years, federal and state governments have made qualifying for a MEWA difficult with only a few grandfathered ones remaining. However, they remain an option.

In the case of a fully-insured MEWA, state law neither prohibits nor regulates their formation. However, they would be subject to federal regulation and would either have to purchase a currently existing group plan that meets all state insurance requirements or a potential insurer would have to file a new product with the Insurance Department.

If a new product is filed to be more accommodating to the needs of the MEWA, the plan would bear the same regulations, such as state mandates, as any new insurance product. Therefore, that option is unlikely to provide the kind of cost relief employers are seeking.

Self-insured MEWAs are subject to ERISA and state regulations. The association would still be subject to state mandates, rating and oversight which makes cost savings difficult. A MEWA would need to be willing to make compromises in the benefit design in order to substantively lower premiums.

If the benefit design differs from the plans currently offered, the MEWA may need to negotiate their own network with a carrier from a weak barging position due to a smaller number of potential patients.

In short, MEWAs remain available in New Hampshire.

However, if the primary motivation is lower costs, then state and federal laws make them a less attractive alternative. There could be some cost savings in the MEWA’s administration costs, and if self-funded, reduce the insurer profits which could also lower costs. However, the average premium that a carrier retains is approximately 10% to 15%, which is well short of the large cost savings employers are seeking.

The desire to address a problem faced by small employers and help them offer affordable health benefits to their employees is something everyone in our state supports. However, until state and federal policymakers can find a lasting compromise between the flexibility to make plans more affordable and regulations to guarantee plans include particular levels of care, alternatives such as AHPs and MEWAs will remain unviable for New Hampshire’s small businesses.

Chris Nicolopoulos is commissioner of the New Hampshire Insurance Department, and D.J. Bettencourt is the Deputy Commissioner of the New Hampshire Insurance Department.