Chart: Association Group Insurance vs. Association Health Plans

Published September 1, 2004
  AGI Association Group Insurance AHP Association Health Plans
Definition The NAIC outlines the following requirements for association group insurance:

  • “[S]hall have at the outset a minimum of 100 persons and have been organized and maintained in good faith for purposes other than that of obtaining health insurance.”
  • “Shall have been in active existence for at least one year.”
  • “And shall have a constitution and by-laws that provide that (i) the association or associations hold regular meetings … (ii) … collect dues or solicit contributions from members, and (iii) the members have voting privileges and representation on the governing board and committees.”
Under the proposed legislation, the association offering the coverage would have to meet the following requirements:

  • Must be “organized in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade, industry, or professional association, or a bona fide chamber of commerce for substantial purposes other than that of obtaining or providing medical care.”
  • Must be permanent and require dues for membership.
  • Must not condition membership or coverage under plan on the basis of health status-related factors.
Purpose To provide greater flexibility and buying power to individuals purchasing insurance coverage on their own, as one of several member benefits offered by an association. To allow small businesses to band together across state lines to purchase health insurance under federal law. To allow more uniform coverage by following federal mandates rather than 50 states’ mandated benefits and regulations.
Are they available now? Yes, in most states, but only to members of an association offering plans. No. Congress will have to pass and the president sign enabling legislation.
Who insures the plan? A licensed insurer provides the plans sold to members of the association. The employer could choose to self-insure or contract with a licensed insurer–the choice is entirely up to the association.
Is the plan regulated? Yes, the licensed insurer is regulated by the state department of insurance. The policies are regulated and in some states the rates are regulated. AHPs would be regulated by the U.S. Department of Labor, just as are companies that self-insure under ERISA. However, if an insurance company is used, the company–not the insurance plan sold through the association–would still have to comply with state regulations where it is domiciled.
Are there solvency standards? Yes, the licensed insurer is subject to state regulations, and oversight is executed by every state department of insurance in which the insurer is licensed. Yes, but the solvency standards cap is $2 million.
Do the plans have to offer mandated benefit coverage? It depends on state laws. Some states impose fewer mandates on association group coverage, which means they can be less expensive than plans that must include all of the mandates. AHPs would not have to comply with all 50 states’ different sets of mandates but would have to comply with any federal mandates imposed by the Labor Department or Congress.
Are the plans guaranteed issue? Plans can be guaranteed issue or underwritten, depending on state law. Yes.
What are the benefits of such a plan? Provides individual health insurance coverage that is tailored to fit the needs of the members. This coverage is portable and remains with individuals even if they change employers. Promotes greater buying power and administrative savings. Allows nationwide associations to offer insurance coverage across state lines without having to comply with each state’s health insurance mandates and regulations. Promotes greater buying power and administrative savings.