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Small Business Groups In Michigan Form Association Health Plan Under Federal Rules | Michigan Benefit Brokers

Small Business Association of Michigan and MichBusiness have created TranscendAHP

Employers are working with Blue Cross Blue Shield of Michigan and Blue Care Network to offer about 10 different large group plans to participating members

Cost savings are projected to be 3-5%, although details must be worked out

Under newly approved federal rules, two small businesses groups in Michigan are offering to their members the option of banding together to purchase large group-type health insurance products and potentially receiving lower premium rates for their employees under “association health plans.”

The Small Business Association of Michigan and MichBusiness have created TranscendAHP, a federally enabled association health plan, and are working with Blue Cross Blue Shield of Michigan and Blue Care Network to offer 10 different large group plans.

TranscendAHP is one of the first in the nation under an executive order signed by President Donald Trump in October 2017 and rules approved by the U.S. Department of Labor in June. The AHPs, which could be offered across state lines, are considered multiple employer health plans and offer the same protections as afforded larger companies under the federal Employee Retirement Income Securities Act, or ERISA.

The Affordable Care and Patient Protection Act of 2010 allowed for an expansion of association health plans, but only through small group health plans. The new federal rules allow AHPs to offer large group health insurance products and be regulated under federal law. However, AHPs that offer products across state lines must follow insurance regulations under the states in which they are licensed.

“President Trump is expanding affordable health coverage options for America’s small businesses and their employees,” said Alexander Acosta, Department of Labor secretary, in a statement. “Many of our laws make health care coverage more expensive for small businesses than large companies. Association Health Plans are about more choice, more access, and more coverage.”

Jennifer Kluge, president of MichBusiness, formerly the Michigan Business and Professional Association, echoed that statement, saying small business owners and employees need affordable health care insurance options to help them complete with larger companies in a tight labor market.

“Access to comprehensive health insurance programs continues to rank at the top of small-business owners’ concerns,” Kluge said in a statement. “Working together with SBAM gives our members the best solution for the health care needs of their employees.”

Rob Fowler, president of SBAM, said the two professional business groups have been working to offer small business owners across Michigan the best health insurance options with comprehensive coverage and quality networks. “As a result of these changes from Washington and our historic partnership, this new AHP is the next chapter in that history,” he said.

Under TranscendAHP, small business members of SBAM and MichBusiness will have access to health insurance products previously available to only larger employers, an option made possible by their organizations’ relationship with the Michigan Blues, Fowler and Kluge said.

Sandy Fester, Blue Cross’ vice president of middle and small group business, said the number of large product offerings for TranscendAHP are still being worked out, but Blue Cross will not be developing new products for the AHP.

“We will use our current large group products menu” for TranscendAHP, said Fester, noting that each large group client has different pricing arrangements based on their size, geography and benefit offerings.

Ed Murphy, president of PM Group Benefit Advisors II LLC, an Auburn Hills-based affiliate of Plante Moran PLLC, said federal rules allow all associations to establish a fully insured AHP beginning Sept. 1. Those that had sponsored a self-insured AHP before June 21 may expand beginning Jan. 1.

“These new regulations expand prior rules in terms of funding, structure, and regulatory compliance of association plans,” said Murphy, adding: “The goal, being, to expand the availability of plans to a broader base of employers, allow more plans to be offered, produce more cost effective plans by virtue of larger, more stable risk pools and mitigate some of the more cumbersome regulations that plague smaller employers in the operation of health care plans.”

Murphy said all existing association health plans are different based on market strategies, pricing, administration and benefits.

Will TranscendAHP lower health insurance premiums?

The new AHP regulations allows small employers — some of whom have faced rising premiums the past several years because of rising medical costs and greater coverage requirements — a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers, DOL said.

Fowler said small business rates have stabilized the last three years after several years of double-digit increases. Kluge said some of her members in the early 2010s had their rates go up 20 to 120 percent.

But Fowler said the association executives believe cost savings for participating TranscendAHP members could be in the 3-5 percent range during the first year.

“Five percent is a pretty big number if you are spending $100,000” on employer health insurance, he said. “There is a promise of saving more in the long-term as the plan will be (company-based) experience rated.”

Kluge said the savings on health insurance could be used to hire additional employees.

In Michigan, however, average rate hikes since 2016 have been modest for small employers with 50 or fewer employees. For 2019, Crain’s reported in July, average small group insurance rates are projected to drop by 0.2 percent, according to the Michigan Department of Insurance and Financial Services. DIFS said individual rate increases are only projected to rise an average of 1.4 percent.

Murphy questioned whether a larger pool of small employers could drive down premium rates in the large market.

“The fact is many, perhaps most, underwriters of large blocks of small employer health plans already use the aggregate pool already to establish underlying baseline rates,” he said. “From there, current rules on rating structures, while limited compared to AHP rules, are already based on the overall group’s plan designs” demographics and claims.

However, insurers could offer lower rates based on lower fixed costs of administering the risk pool, Murphy said.

Under TranscendAHP, small businesses would continue to use their licensed health agent to get price quotes and other information on the various plans offered, including health savings accounts, health reimbursement accounts that all have different levels of deductibles and coinsurance.

Companies with 50 or fewer employees may apply for coverage, including sole proprietors with no employees.

Because TranscendAHP is fully insured and not subject to some of the Affordable Care Act’s mandated benefits and taxes, the new plan allows the cost of benefits to more precisely match the demographics of each business and employees.

For example, unlike ACA premium rates that are solely determined by age, location, family size and tobacco use, small businesses under AHPs will determined by individual company demographics, location of your company and the age and gender mix of covered employees. This expanded criteria for pricing benefits premium costs to be more closely tied to individual groups.

“This opens up options for small businesses to negotiate as large group as far as plan design and being able to offer us up as one buying group,” Fowler said.

TranscendAHP plans cover many of ACA’s 10 essential health benefits, excluding pediatric dental.

Creating separate company to manage the AHP

Kluge said the two business groups have put aside their competitive forces and are “doing what is best for the small business community.” The partners have created a 501c6 nonprofit organization, at, that will allow other associations and chambers of commerce to join, Fowler said.

Billing will be conducted by the two associations’ partner, AHP Management Solutions, which will work with existing company independent insurance agents to ensure smooth enrollment and monthly billing administration.

“There is a lot of interest from chambers and associations,” Fowler said, adding he expects several other organizations to join forces this year. “The reality is this is about volume. It makes more sense to have one really large AHP than several smaller ones.”

Lansing-based SBAM services more than 26,000 member companies in 83 Michigan counties and MichBusiness, based in Warren, serves approximately the same number. They represent approximately 7 percent of the state’s 800,000 small and sole proprietor businesses.

Fester also said Blue Cross has heard from a number of chambers, associations and insurance agents about creating their own AHP.

“It is fair to say once the final rule hit, we fielded more calls. Everybody is trying to understand what it means,” said Fester.

But Fester said it is unclear what might happen to the small group market if a number of AHPs are formed and large numbers of small businesses leave the small group market.

“We are extremely proud of our small group market and premium rates” in which HMO plans have declined in price by an average of 1 percent, Fester said. “We have a very favorable rating system with high retention rates.”

In 2019, Blue Care Network is offering an average 1.1 percent increase in small group market with HMO products dropping 1 percent in average price. This year, small group rates increased by average of 4 percent after 2.5 percent average hike in 2017 and 1 percent increase in 2016.

By Jay Greene
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