What is an Association Health Plan?

When considering your organization’s health coverage offerings, it’s important to understand association health plans, or “AHPs.” Fundamentally, association health plans are a type of group medical insurance.  An association health plan can provide small businesses and their employees with significant savings, much like “large group” medical coverage provides to larger firms.

“Group insurance” means health insurance coverage providing for multiple individuals who are not related to one another by any familial relationship. You’ll typically hear about group coverage in reference to the health coverage offered to employees by their employer, or even by employee groups, like unions. “Large group” health insurance covers roughly 100 million people in the U.S., and depending on your state, your business would need either 51 or 101 employees to qualify for the advantages and savings associated with large group coverage. Association health plans are especially useful because they bring these benefits to smaller businesses, too.

Association health plans keep their rates low by “packaging” together smaller groups of members and paying for members’ care in bulk. AHPs essentially leverage their size for better premiums.  Their representatives can negotiate with insurance companies, healthcare providers, and other vendors. When you join an association health plan, those savings are passed on to you.

Can I Join an Association Health Plan as a Small Business?

AHPs are a particularly attractive option for small to mid-size firms, or employers with fifty-one or fewer employees, as well as contract employees, freelance workers, and self-employed individuals. In June of 2018, new legislation made it possible for sole proprietors to join association health plans, as well.

As a small business, you can enroll in a group health insurance plan at any time of the year. In other words, you don’t have to wait for an open enrollment period. Employers can participate in association health plans regardless of their incorporation status. Participating employers can be for-profit or non-profit organizations.

When a group of employers join together to provide health insurance to their employees through an association health plan, together they form what is called a Multiple Employer Welfare Arrangement, or a “MEWA.” Less frequently, you’ll hear these groups of employers referred to as “multiple employer trusts” or “METs.”

How do I Join an Association Health Plan?

To join an AHP, you’ll need to provide your business type, (i.e., incorporation type), and be able to produce the business tax forms your company filed during the last fiscal year.  You’ll also provide your company’s location and other related information. Lastly, you will need to have a rough idea of who you will want to offer coverage to, as well as those employees’ ages and the number of dependents they have. This information will be grouped together to provide you with an accurate rate. Keep in mind that the employees you offer coverage to can choose whether they’d like to enroll in or deny the coverage. 

It’s important to note that choosing to participate in an AHP will change which documents and disclosure mandates you’ll have to abide by. For example, federal tax law requires small businesses offering AHPs to their employees to file Form M-1s and Form 5500s.  Your state may have other laws specific to AHPs that you’ll need to adhere to, as well.

You will want to weigh the pros and cons of an AHP versus a traditional health insurance option before making the decision to commit to group health insurance. Essentially, you should conduct a miniature cost-benefit analysis for this decision, which can be difficult for even the most experienced of human resources professionals. Before you commit to an AHP, it’s a great idea to partner with an expert in benefits for small businesses, such as a health insurance broker.

After you’ve decided an AHP is the way to go for your small business, you should carefully choose which association you will partner with. Coverage offered as part of an AHP can be structured to meet your employees’ needs. For example, some AHPs are designed to offer less coverage for prescription medications, but more comprehensive coverage for annual primary care doctors visits. Having a handle on the preferences of your particular employees is a great place to start.

How to Get Help from Experts:

After learning all about AHPs, you may be considering providing this type of health insurance at your company. During the process, it always helps to talk to experts in human resources for small businesses. Benely is here to help. Contact Benely for assistance in finding the perfect coverage for your employees.