California will not allow association health plans to be sold in 2019.
Governor Brown signed legislation that will prohibit the formation of new association health plans in California. The Trump Administration had approved the creation of association small group plans in 2018. Governor Brown signed SB 1375 that will prevent small businesses and self-employed individuals from enrolling in a group health plan with no employees.
Association Health Plans are generally comprised of sole proprietors and self-employed individuals who belong to an association or trade group. In theory, these association or trade groups could create health plans to offer to their members. One example of an association plan is the CalCPA Multiple Employer Welfare Arrangement (MEWA) health plan. Owners must be members of CalCPA in order to enroll in the health plan and their employees are also eligible.
Association plans, under the Trump Administration, do not have to include all the Affordable Care Act elements and benefits. This has raised a red flag for some health care advocates that the new association plans would create plans that exposed members to potentially high medical costs if they did not have to adhere to the ACA small group plan conditions. Another issue for some people is that many MEWAs became insolvent in the 1990s leaving members stranded with unpaid medical claims.
Association Health Plans Closed To California
SB 1375 legislative summary states, “The bill would prohibit employer group health care service plans and employer group health benefit plans from being issued, marketed, or sold to a sole proprietorship or partnership without employees directly or indirectly through any arrangement, and would require that only individual health care service plans and individual health benefit plans be sold to any entity without employees.”
The purpose of the association health plans was to let sole proprietors, who had no employees and belonged to a trade association, purchase a group health plan. Under SB 1375, new association plans cannot be created and sold to self-employed individuals.
No Alternatives Offered To Sole Proprietors
It’s possible that some or all of the new association plans would be riddled with loop holes exposing the members to high medical bills. A simple solution would have been to allow association plans but they had to mirror the small group plans offered through Covered California. But we will never know because California slammed the door on any new and innovative health plans being developed under the name plate of an association plan. Instead of defining what a good and decent association plan might look like, California decided to block them altogether.
California’s decision to nix the association plans would not be so bothersome except for the fact that the state is home to a variety of inequitable health care plans. Large self-insured plans don’t have to follow the ACA rules. There are the CalPERS health insurance plans that are better than many large employer group plans. Unions also offer health plans with tremendous benefits.
Why should your employment dictate whether your health insurance is worse or exponentially better than your neighbors? Shouldn’t all health plans be the same? The human condition does not change depending on who you work for. The individual who works for the State of California, a union, or a self-insured plan can have the same health conditions as a self-employed individual. People routinely move from large group plans to individual and family plans and their health conditions don’t change. But the price and member cost sharing is far higher under small group and individual and family plans than it is with some of the union plans. Is that fair?
We will never get a chance to see if the market place could develop good association health plans at a reasonable price in California. Just like California has banned short term medical plans with absolutely no alternatives, it has done the same with the association plans. Instead of working with the industry to find solutions for self-employed people, who may earn too much income to qualify for Covered California subsidies and have no employees, California has decided that market innovation has no role in health insurance.
2018 Association HP