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association health plan

Association Health Insurance

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‘Association’ Health Insurance... really?

Many trade associations used to have group health coverage for their members. Subscribing to the plan was typically voluntary. You did not have join the association's health insurance plan in order to become a member. That would have discouraged many prospective members from joining the association. In addition, no one was turned down because of pre-existing medical conditions. Guaranteed eligibility for health insurance was a member benefit. Unfortunately, over a period of time, those good intentions ruined the plan.

If acceptance is guaranteed, there is a problem with too many members with health problems outweighing the enrollment of those with no health problems. Sooner or later, some of the healthy who stay healthy will quit the plan because they can find lower cost health insurance coverage elsewhere.

Members with health problems were most likely to join the association plan, but people in good health could shop elsewhere. That tendency increased the cost of maintaining the plan a little which consequently increased the premium charged a little which led more healthy members to shop elsewhere which increased the cost of maintaining the plan even more etc., and eventually it just cost too much to maintain the plan and it was closed.

Joining an association in order to be part of a "large group" to get a better health insurance rate is a vain hope. However, there is coverage on the market that is promoted as an "association" plan in order to give the misleading impression that a large group of self-employed people, or consumers, or both, has been formed for the purpose of getting group discounts on various products including health insurance.

This sort of association gambit is different from the bona-fide trade association plans of years past. In this marketing scheme, acceptance is based on health history just like regular individual/family health insurance. If each member is underwritten as an individual, then how is it any more than the sale of individual coverage using an association format as a marketing strategy? So the association "membership" makes no difference.

Health Insurance associations

There is no bulk group purchasing discount for health insurance. It's just individual health insurance in an association package designed to fool the gullible into believing that it is something special. This may lead the careless to assume that there is no need to carefully examine the offering with the skepticism that it deserves.

There may be an actual association, but its role in getting a better deal on health insurance is zero. In fact, the more the association angle is promoted, the more likely it is that what is actually offered is a poorer value than what could be obtained elsewhere. The association angle lulls some consumers into thinking that they can't go wrong if it is through an association and they then neglect to carefully study the terms of the policy. The result is the purchase of a plan that has a lot more potential out-of-pocket claim expense than they thought. Only when claims have to be made do they then realize that they could have bought something much better for the same price.

Some honestly marketed health insurance may use an association as a filing convenience for selling in various states, but they are not promoted as if the association filing is for the purpose of getting a "group discount".

What naive buyers fail to realize is that an association of some sort with many members may be a large group, but it is nothing special in the health insurance business. The only true large groups are situations where the group was not formed for the purpose of buying health insurance and a certain minimum percentage of members of the group must enroll, e.g., an employer buying insurance for employees with at least 75% of eligible employees on the plan.

The offering of supposed association health insurance is a mere marketing ploy to sell individual health insurance. Falling for petty deception in health insurance can lead to poor decisions and maybe even poor health from not getting medical attention as a result. Pick from the best of the honestly presented individual health insurance plans. Can you really trust anyone who pretends that there is a price benefit derived from an association when that really is not the case?

There is an exception to this in one of the few states where state law guarantees that any individual can buy health insurance irrespective of health status. The result generally is very high rates for individuals, but it is possible to join a consumer association not explicitly formed for buying insurance which can screen members for life insurance eligibility, and thereby result in screening for the health insurance benefits, and thereby provide lower rates for healthy applicants.

business association Health Insurance

Employer Health Insurance Coverage

If an employer provides group health insurance, each eligible employee is covered irrespective of medical history. There are no exclusion riders on pre-existing conditions and the cost for a specific employee does not depend on the health conditions of that specific employee. If there is a waiting period for pre-existing conditions, there is usually a month's credit against that for every month that the employee had prior coverage if the gap is no more than so many days, e.g., 90 days.

Health insurance coverage for small employers (2 - 50 employees) is guaranteed issue under the federal HIPAA law of 1996 (see sec. 2711 on p. 28), but the premium is not controlled in any way unless state law provides otherwise. For example, the premium for the group as a whole may be adjusted initially based on the health history of all the employees to be covered, and adjusted annually based on claims made, within certain limits, dependent on the particular state's law. If premiums are set according to the claims of all small groups in a geographic area, it is known as community rated. Any such adjustments vary from state to state.

If employment is terminated, the employee and dependents can remain on the insurance for up to 18 months provided the employee pays for it. Under the federal COBRA law, the employer must have 20 or more employees for this health insurance right to exist. Many state laws extend this mandate to all other employer plans, but conditions may vary, e.g., under state law, the employee may have had to be on the plan for six months prior to termination of employment.

Group and individual coverage cannot be terminated because claims are made, i.e., it is guaranteed renewable. However, some health insurance companies have tried to find ways to raise an individual's rates because of claims made, but this is usually vigorously opposed by regulators and thwarted by law or regulation.

Large Group Health Insurance Coverage

Employer group coverage of more than 50 employees has less legislative protection than small group or individual health insurance. Typically, large groups are not guaranteed to be issued any health insurance and the premium is based on the claims history or expected claims history of the group. The individual employee does not have lesser rights under COBRA, HIPAA, or other laws, but some lesser sized large groups have had to abandon their health insurance because large claims have made the renewal premiums prohibitive.

By contrast, claims for small group employer health insurance coverage (50 employees or less), are pooled together on a community basis, and there are limits on how much a particular small employer can be charged.

Get the Right Help

Enlist the help of someone who deals with many insurance companies so you can compare any 'association' marketing offer with a number of other companies' plans. If the association deal sounded good, you may be surprised to find that it is not the best at all. When carefully compared, regular health insurance offered without gimmicks and angles will prove to be a better purchase.

Watch out for unlicensed operations. If an application is made with a health insurance licensed representative, then most likely the plan being sold is also licensed. However, this is not always the case. Sometimes a licensed health insurance producer makes the mistake of getting involved with an unlicensed operation because the prices are so low and the sales are easy. Depending on state law governing health insurance, such persons may then incur liability for any unpaid claims of the unlicensed "insurance", because they should have known better.

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