A Washington state health-insurance association covering 113,000 teachers, educators and their families has made the grade, and can continue to offer medical coverage, state Insurance Commissioner Mike Kreidler announced last week.
But while the Washington Education Association (WEA) health trust won approval, dozens of other associations and trusts with plans covering hundreds of thousands of small-business employees and their households have either been denied or are in limbo, awaiting a decision. Of Washington state’s more than 60 association and trust plans, 11 are approved, nine are under review and the rest have been rejected.
Mounting frustration with the process has caused association-plan backers to run full-page newspaper ads and lobby state lawmakers to protest Kreidler’s actions. Many are challenging the Office of the Insurance Commissioner (OIC) in court or through administrative hearings.
Kreidler asserts that the Affordable Care Act brought into play new rules that affect association health plans, changing which businesses can buy insurance through different trusts and reshaping the way the insurance is priced. Associations counter that Kreidler is misinterpreting the law.
Associations and trusts for years have been the most popular insurance option for Washington’s small employers because their products generally were cheaper than the health insurance available on the open market. That resulted in part from the plans’ ability to charge businesses with sick workers more money, a practice no longer allowed under the ACA.
“Associations offer a lot of benefits to their members, and to their communities. We’ve worked very hard to reach out to as many associations and insurers as possible for the last several years to help them understand the new federal law,” Kreidler said in a statement.
For the WEA’s health association, the review went smoothly.
“Our pool [of covered employees] has remained stable, so we haven’t had to make any changes,” said Linda Mullen, director of communications at the WEA. “It’s the same people we’ve been covering for 40 years.”
For others, it hasn’t been so easy. The insurance commissioner’s office says associations need to clear two bars for approval. First, they must cover businesses in the same sector as the associations, such as car dealers or farmworkers. Then, they must price their insurance in a way that meets the new rules, which generally means prices can vary — within prescribed limits — by age and geography. They cannot vary by sex.
An insurance department analysis of recently proposed rates found that in some cases, older workers and women of reproductive age were being overcharged in association plans.
The Health Alliance for Technology (ALLtech) trust, which provides insurance for 110 smaller technology companies, missed both marks when it was reviewed, and it’s appealing the decision.
Before the ACA kicked in, “we went with our arms wide open” to the insurance commissioner to try to set up a product that would meet the new rules, said Ken Myer, the trustee providing fiduciary oversight at ALLtech.
The companies using ALLtech plans are “competing for talent with some of the bigger players in the industry,” Myer said. They need to be able to offer plans with rich benefits that at least approach what’s offered by large employers, and ALLtech helped them do that, he said.
The state review process has gone more slowly than expected, and the office is still issuing decisions for plans started in 2014, some of which still could be in effect. All the 2015 plans are pending review.
None of the workers covered by disapproved plans have lost their coverage, said Stephanie Marquis, an insurance department spokeswoman. The trusts have 90 days to appeal the decisions and many have. If they do not, the department has offered to help the trusts transition employees to approved plans.
The Washington Counties Insurance Fund trust, which covers 7,500 county workers plus employees working at fire, hospital and library districts, was rejected because of its prices. Jon Kaino, executive director, said the rates had nothing to do with workers’ health, and he can’t understand the ruling.
In fact, Kaino argues that the trust’s prices are fairer than what’s offered on the open market. Under the ACA, insurance prices can increase each year as a person gets older. The county trust instead takes the average age of all an employer’s workers and sets the rate there. That way, insurance for a 60-year-old employee costs the same as for someone who is 30.
The solution is simpler for bookkeeping and could discourage an employer, who pays much of the insurance costs, from discriminating against older workers, Kaino said. On charging individuals according to age, he said, “it’s incentivizing age discrimination, and we don’t do that.”
Marquis didn’t know exactly why the county trust failed the pricing test. The insurance department asks trusts to explain why one group is being charged more than another, and sometimes the trusts haven’t provided enough information to explain it.
“We just believe we’re enforcing the federal law as written,” Marquis said.
Kaino’s trust is to argue its case before an administrative hearings officer later this month, and he’s optimistic: “I believe we can win.”