Fewer Professional Groups Offer Health Plans as Costs Rise
Professional associations increasingly are stopping association health plan coverage for their workers and health insurers are dropping associations as health care costs have increased, the Los Angeles Times reports.
According to the Times, many professional associations offered coverage to workers who could not obtain it elsewhere because of pre-existing medical conditions. Fewer than 25% of the 1,020 professional and small-business associations surveyed in February offer medical coverage, although most of the groups said they would like to, the Times reports.
In addition, nearly 63% of uninsured workers in the U.S. are self-employed or work in small firms, according to Todd Stottlemyer, president of the National Federation of Independent Business.
According to the Times, insurers began dropping professional associations about a decade ago amid mandates that required groups, including employers, to offer coverage to all members, regardless of pre-existing conditions. However, associations do not pay a portion of premiums as employers do, and coverage is purchased as a group rather than individually.
In today's market, private insurers are attempting to sell lower-cost individual policies to young and healthy people, which "leaves higher-risk, older and less-healthy people to the group market, resulting in what is known as adverse selection," the Times reports.
As healthy and young members leave an association plan, the percentage of members with above-average medical costs increases -- a move that forces the underwriter to raise premiums and often results in a so-called "death spiral," in which medical costs exceed the plan's ability to raise premiums to cover them. In addition, private insurance companies often refuse to provide individual coverage to those with any medical condition, and, as a result, "many people who lose association coverage in effect become uninsurable," the Times reports.
Janet Trautwein, CEO of the National Association of Health Underwriters, said, "Costs are going up everywhere in every type of plan," adding that associations "not only have the normal costs going up, but they have this adverse selection at the same time. It's a double whammy" (Girion, Los Angeles Times, 3/27).