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The health insurance regulatory landscape in the United States may soon be changing in ways that offer new opportunities and new hazards for freelancers and entrepreneurs. The new opportunities are ones that allow sole proprietors to join Association Health Plans, Short Term Health Plans to be extended from a three-month to a 364-day maximum period, and both to be sold across state lines. The hazards are that these plans pose substantial financial risks and may destabilize ACA marketplaces, making insurance more expensive for many people.

Although the proposed new regulations are still works-in-progress, as health insurance enrollment periods for 2019 approach, freelancers should pay careful attention to changes affecting Association Health Plans and Short-Term Health Insurance Plans, which are now being touted as possible alternatives to ACA marketplaces. While both these types of plans may be promoted as offering lower premiums than ACA-compliant plans, experts have raised significant questions about their quality of coverage, including cherry-picking only the healthiest customers, allowing age and gender discrimination, limiting coverage of pre-existing conditions, having lifetime benefit caps, offering no or limited coverage of many common conditions, and, in the case of AHPs, potential financial insolvency.

Background

With freelancers on track to become the majority of the United States workforce within the next one or two decades, health insurance for freelancers, entrepreneurs, and small businesses is becoming increasingly politically important. In the past, the United States model of employer-funded private health insurance not only left many of us uncovered, but also had been a major obstacle for people who wanted to leave the security of traditional jobs and strike out as freelancers or entrepreneurs. While the passage of the Affordable Care Act in 2010 and efforts by Freelancers Union have made health insurance more accessible to freelancers, insurance still remains prohibitively expensive for many of us.

In response to the high cost of health insurance and September 2017 failure of Congress to repeal the ACA, on October 12, 2017, President Trump issued Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States.” Explicitly intended both to lower health insurance costs for some consumers and businesses and to undermine the ACA insurance marketplaces and cause them to fail, the potential effects of the proposed changes to insurance regulations for AHPs and STHPs will significantly destabilize health insurance marketplaces and pricing over the next few years if implemented in their currently proposed forms.

For freelancers, though, an even more immediate question is whether this will enable us to save money on health insurance or whether new low cost offerings would increase the risk of high out-of-pocket medical expenses and even potential bankruptcy in case of a medical emergency.

What are Association Health Plans (AHPs)?

Association Health Plans are designed to let small employers group together into associations to provide insurance to employees. Originally, this legal structure allowed professional associations or small businesses in related industries, such as real estate agencies, law firms, or construction companies in limited geographical areas, to act as single companies in providing insurance for their employees, under the assumption that an association of thousands of people could get a better deal than a company with only a few dozen employees. Three major proposed regulatory changes to AHPs are now under review. The first is allowing sole proprietors, including freelancers, to join AHPs. The second is permitting AHPs to be sold across state lines, following the regulations of their home states (often ones with less regulatory oversight) and bypassing some of the regulations of states in which they are selling insurance. The third change is allowing AHPs to be formed solely for the purpose of providing health insurance rather than requiring participants to share other commonalities.

While AHPs can reduce insurance premiums for young healthy freelancers, the economics behind this is worrisome. AHPs can potentially offer savings on premiums for some groups by either denying coverage to certain groups, reducing scope of coverage, or having differential pricing e.g. charging up five times more to older compared to younger customers or charging women of childbearing age more than men of the same age. Although racial discrimination is illegal, AHPs can vary charges by industry, raising the specter of higher costs for industries that traditionally employ more women or ethnic minorities.

Perhaps the most worrisome aspect of deregulating AHPs is the very reason for which the current regulations were put in place, namely their past history of insolvency and even outright fraud. AHPs and other “multiple employer welfare arrangements” (MEWAs) have a long history of scams and bankruptcies. In the 1980s, 1990s, and 2000s, over half a million people were left with a collective $200 million in unpaid health bills due to the largest insolvent MEWAS, and many other smaller fraudulent and insolvent ones have been shut down by state governments. While reputable organizations such as the AARP or established professional associations may offer legitimate AHPs, be wary of new or unknown providers, especially if they offer a six-month free supply of all-natural herbal male enhancement products along with your health coverage.

What are Short-Term Limited-Duration Health Plans (STHPs)?

Short Term Health Plans, currently restricted to a maximum of three months, are precisely what their name suggests, an afordable way of bridging temporary gaps in coverage for people who might be waiting for new coverage to become effective or for the start of the next ACA open enrollment period. These plans are sometimes described as "hit by a bus" plans, designed to prevent catastrophic financial losses in the case of an unanticipated emergency. The proposed rule changes, though, extending their duration to a maximum of 364 days, may tempt some people to see them as a low-cost alternative to ACA-compliant plans. As they tend to have high deductibles, caps on lifetime benefits, and limited coverage (with maternity benefits and prescription drugs among the common exclusions), they should not be considered an alternative to other forms of health insurance, but rather as useful only for their originally intended purpose.

ACA compliance: What's missing from AHPs and STHPs

The Affordable Healthcare Act did more than simply create insurance marketplaces. It also defined essential services that ACA-compliant plans needed to cover. Both Association Health and Short-Term Health Plans are exempt from the need to cover these essential services. Although AHPs and STHPs will cover some of the costs of hospitalization and emergency care, they might not include prescription medicines, maternity and pediatric care, mental health treatment, substance abuse treatments, chronic disease management, preventive services, and rehabilitive services and devices such as physical therapy or crutches.

Unlike ACA compliant plans, STHPs and AHPs may place dollar limits on total coverage, daily coverage, or the amount covered for specific services such as office visits or ambulance services. Even worse, there may be no cap to out-of-pocket medical expenses under these plans, meaning that someone with a major illness or who requires a complex surgery might still need to pay hundreds of thousands of dollars in medical costs despite having such insurance.

An even more worrisome issue is that both AHPs and STHPs can exclude "pre-existing conditions" from coverage, even if the patient is unaware of the existence of the condition. On an obvious level, this means that if you are among the quarter to half of all Americans who might have a pre-existing condition, from asthma to diabetes or cancer to high blood pressure, you might either be denied coverage entirely or the insurer could refuse to cover any treatments pertaining to those conditions.

Even worse, though, is that the exclusion may apply unexpectedly. Imagine, for example, you had a cough a few months before enrolling in an AHP or STHP. You went to a doctor and were give a prescription for cough medicine. A few months later, you go for a checkup and your doctor finds lung cancer. If you have ACA-compliant coverage, your cancer treatments would be covered. In the case of a non-compliant plan, the insurance company could claim that the earlier cough was a symptom of the cancer and deny you coverage.

Make informed choices

Freelancers do not have sick days. If we stop working, we stop making money. Because illness can be such a significant financial risk for us, high-quality health insurance is crucial to our financial survival. While some freelancers can obtain coverage through parents or spouses, and others may be eligible for VA, Medicare, or Medicaid benefits, many of us rely on ACA individual marketplaces.

While premiums can be frustratingly high, ACA-compliant plans offer a level of coverage and security not found in most AHPs and STHPS. For young, healthy people who are not eligible for ACA subsidies but nonetheless in financial difficulty, the low premiums of STHPs or AHPs may offer short-term solutions, but these should be regarded as temporary measures and researched very carefully, both for provider solvency and specific terms and exclusions.

Carol Poster has taught professional writing at Florida State University and York University (Canada) and published numerous books, photographs, and articles on outdoor recreation, travel, green living, and culture.