The association health plan two business groups formed last fall for small Michigan-based employers has recorded strong enrollment in its early months.
TrascendAHP — created in October by the Lansing-based Small Business Association of Michigan and Warren-based Michigan Business and Professional Association — enrolled about 300 small businesses through January. Those companies account for more than 1,400 contracts between TranscendAHP and their employees for health coverage.
The early results put TranscendAHP well on its way to achieving its goal of signing 2,000 contracts by the end of its first year, a threshold that organizers believe is needed to achieve actuarial sustainability.
TranscendAHP’s early enrollment “tells us there is a real appetite for this,” said President Rob Fowler, who’s also the CEO of SBAM.
“If that stays as a trend, I think we’re going to be in really good shape,” Fowler said. “It seems like it is off to a good start and that it is going to be successful.”
Fowler now expects that Transcend-AHP could reach 3,000 to 3,500 contracts by the end of its first year “if we just sort of stayed on the trajectory we’re on right now.”
SBAM and Michigan Business and Professional Association, also known as MichBusiness, partnered to create the nonprofit TranscendAHP for sole proprietors and small businesses with 50 or fewer employees. TranscendAHP offers 20 different fully insured large-group policies from Blue Cross Blue Shield of Michigan and its HMO subsidiary Blue Care Network.
TranscendAHP got off to such a good start that Fowler already sees the potential to consider adding cost-control elements, such as wellness and care management, to the coverage in the second year.
“In my mind, building a good, solid group of companies who are interested in staying in this for the long term and saving money, my hope is we can talk to them about wellness, because now they have a stake in the game,” he said. “We can talk to them about care management and things that large employers do that small businesses don’t, and we’ll be able to make certain that that experience is good.”
Association health plans allow similar employers — those in the same trade, industry, or profession, or based in the same geographical area — to come together to form a large risk pool of employees to insure.
In qualifying for large-group insurance coverage, the pool of small employers avoids some of the taxes, fees, regulations and coverage mandates in the federal Affordable Care Act that apply to small businesses, including requirements to offer 10 essential benefits in their health plans. A small employer’s location in the state, composition of its workforce, industry type and group size also matter in setting rates.
The net results for participants are lower health premiums. In some cases, early enrollees in TranscendAHP reduced their premiums by 20 percent to 30 percent from what they were paying before, Fowler said. He cites one small business, an I.T. company, that cut $50,000 from its annual health care costs.
Grand Rapids-based Jetco Solutions Co. was among the early adopters that signed on to TranscendAHP. Jetco’s savings were not quite as big as some that Fowler cites, although the company was able to save some costs and significantly ease what employees paid for coverage.
Jetco, which employs 17 people, trimmed 4.5 percent from its health care costs while reducing the deductible built into the coverage from $3,000 to $1,500.
“Our employees have a slightly better health insurance program and a lower deductible,” said President Sue Tellier, who co-owns the companies with her husband, Jon Tellier.
Jetco transitioned to the AHP as it was reworking health benefits in an effort to reduce its employees’ sizeable contributions toward their premiums, Tellier said.
Jetco’s previous health coverage was “fine,” but the company wanted to look at options that would help Jetco transition to covering a larger share of the premium, she said.
“One of my big motivators on the cost side was that our company contributes more to it, and of course, we have to budget more toward doing that so I had to make sure the costs were affordable,” she said. “The cost savings we were able to find were extremely advantageous.
“Being able to offer a slightly better plan at a better price point really allowed my company to pick up the cost of that premium. We wanted to give that to our employees.”
The 300 small businesses statewide that now use TranscendAHP came from more than 1,800 that requested quotes for health coverage between October and January, including from some companies that had more than 50 employees and were not eligible to participate, Fowler said. The strong early enrollment in the AHP’s first four months came despite a launch that was “not completely smooth,” Fowler said.
TranscendAHP initially had problems with its online quoting tool, which occurred during a time in which insurance agents were already busy with the annual open renewal period for health coverage. The AHP also was “overrun with requests” for quotes, Fowler said.
“We had so many requests (that) we had a hard time keeping up,” he said. “Of all the problems you can have, that’s not the worst one.”
Of particular interest in the first four months of enrollment was that more than 100 participants are sole proprietors who previously bought their health coverage on the individual insurance market. One in five TranscendAHP contracts are with employees at small businesses that did not previously offer health coverage.
“This is market entry,” Fowler said. “This is sometimes getting back into the game or getting into the game for the first time.”
He expects that because of their demographics, 20 percent to 30 percent of small businesses seeking a quote can get a better price for employee health coverage through the AHP than they presently get through Michigan’s small group health insurance market. Others won’t save, or won’t generate enough of a reduction to warrant moving their health coverage.
“It’s not for everybody,” Fowler said.
U.S. Department of Labor rules issued last June to implement an October 2017 executive order by President Trump broadened the ability of small businesses to unite to form association health plans. Fully-insured plans could begin operating as of Sept. 1, 2018. Self-funded AHPs could enter the market on Jan. 1, 2019 for existing associations, and on April 1 for new associations.
The Congressional Budget Office projects that association health plans formed under the new rule will enroll “roughly” 4.6 million people nationwide by 2022, about 3 million of whom will transition from small group coverage. The plans will cost about 30 percent less than coverage with policies in fully regulated small group markets, according to a January report from the CBO.
Avalere Health, a consulting firm based in Washington, D.C., estimates AHP enrollment of 750,000 in 2020 growing to 1.9 million in 2021 and nearly 3.2 million in 2022 under a “moderate” use scenario. Enrollment under a “high” use scenario could reach 4.3 million, according to the company.
An estimated 1.7 million to 3.2 million people will transition from small group policies to AHPs. The loss to the small group market will drive up those premiums 0.01 percent to 1.9 percent, resulting in an additional 130,000 to 140,000 people becoming uninsured, according to Avalere’s estimates.
Since the new federal rule took effect, 34 association health plans were launched in 13 states, according to associationhealthplans.com, a Nashville, Tenn.-based resource site for AHPs. In a January report, the website noted the vast majority of the 28 active AHPs were organized by regional associations or chambers of commerce.
TranscendAHP has been the only association health plan to form so far in Michigan.
Kevin Coleman, a health care consultant who established associationhealthplans.com in 2018, expects enrollment could go even higher than projected as small businesses seek out options to ease the high cost of providing employee health coverage.
“Small employers are in a situation where they’ve had very significant health insurance price hikes over the years, and they want to retain employees and have competitive packages, but it’s also not something central to their business,” Coleman said. “Providing something that gives economic relief and still have competitive benefits, that’s very, very compelling in that market.”
Benefits packages offered by the AHPs trend “toward comprehensive health coverage that includes items such as mental health benefits and prescription drug coverage alongside mandated benefits such as maternity,” as well as ambulatory care and hospitalization, according to the associationhealthplans.com report.
“These are not skinny plans,” Coleman said.
Because of the timing of the federal rules, a vast majority of the early AHPs are fully insured plans, according to associationhealthplans.com.
Coleman expects that in the next three to four years, the early AHPs formed as fully insured plans will consider becoming self-funded “if they have adequate claims experience and a feeling for how their population is going.”
“They may see that they seem to have a stable and easily predictable population and will look at self-funding because self-funding offers the greatest amount of health savings potential,” Coleman said.