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Why Association Health Plans Don't Work?
A few years ago, professional and small business associations were a source of health insurance for many self employed Americans. They offered group health insurance coverage to association members, some of whom could not obtain individual health insurance because of pre-existing medical conditions.
Insurance companies began dropping associations in the mid-nineties, spurred by state mandates that required all groups to offer to include all members even those with potentially expensive medical conditions. Unlike employers, associations, unlike employers, don't pay any portion of premiums, so only those members who need the guaranteed acceptance of group coverage, namely those with pre-existing medical conditions, enrolled in the association plans. Young and healthy members opted for lower-cost individual policies, leaving the association plans with higher medical costs forcing the insurer to raise premiums to the point where only the sickest members remained in the plan.Insurers call this adverse selection. At that point, the underwriter waa looking for any legal excuse to drop the group.
Today, only a small fraction of the 1,020 associations surveyed offer health insurance. Since the self-employed and workers in small firms account for two thirds of the uninsured workers, the closing of this source of coverage impacts the number of uninsured American workers.
Posted by Phil Daigle on April 1, 2007 9:10 PM
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