What do I need to know before buying into an AHP?
Consumers should be aware that association health plans are not the same as group health insurance plans. Group plans are subject to regulations that ensure that all members of the group are charged the same premium, and that premium rates will remain relatively stable from year-to-year. Most group plans are also subject to state regulations that mandate coverage for specific diseases or conditions, such as diabetes self-management training or mastectomies.
In contrast, AHPs are not required to offer the same premium rate to each member. It is also legal for them to dramatically raise premium rates from year-to-year, to the point where consumers are "priced out" of the plan. Also, AHPs are not subject to state regulations mandating coverage for specific diseases or conditions.
Although regulations are the bane of insurers' existence, they do result in a more reliable and consistent product. However, they also result in higher premium rates. This is the big advantage of AHPs - because they do not have to follow as many rules or cover as many specific diseases or conditions, they can offer cheaper insurance coverage.
AHPs are not all bad. Some consumers enjoy the fact that it is easier to qualify for AHPs than individual insurance policies, and of course, lower premium rates make everyone happy. But it is important to be aware of what you are getting into before you buy. Some AHPs offer quality insurance coverage, while others may engage in fraudulent or deceptive behavior - and because of the relaxed regulation of AHPs, it's extremely difficult to tell which kind of plan you are buying into.
Here are some questions you may want to ask before buying into an AHP:
- When can premiums be increased? How much can they increase?
- How much does the plan have in cash reserves to pay claims?
- Has the plan ever been sued for failure to pay a claim?
- Is COBRA continuation coverage available to members of the plan?
