Employees & Association Health Plans

A Quick Introduction for Small Business Workers

By Kev Coleman - Health Insurance Industry Expert & Author

Updated on November 18, 2020

Small Biz Employees & Association Health Plans

In this article, you’ll learn:

  • What happens if your small company joins an association health plan?
  • What health benefits are in an association health plan?
  • How is an association health plan different than a single company health plan?
  • Can my spouse and children get covered through our association health plan?
  • Does COBRA apply to association health plans?

What Happens if Your Small Company Joins an Association Health Plan?

You’ll be notified by your business if the business joins an association health plan (otherwise known as an AHP). An AHP is an instrument by which many small businesses can band together and participate in a large single health plan that is less expensive than would be the case if each business had their own separate small group insurance plan. The business should also supply information on the annual enrollment period for the AHP as well as provide a Summary Plan Description that describes the benefits, deductibles, co-pays, and conditions of the AHP.

If you are outside the annual enrollment period for the AHP and wish to enroll, you should contact the AHP (or your HR representative) and discuss whether you satisfy any of the conditions that allow for a Special Enrollment Period.

What Health Benefits Are within an Association Health Plan?

An AHP is a means by which small companies can offer “large group” health insurance. Large group health insurance, which covers nearly 100 million Americans, is governed by a federal law known as ERISA as well as many other federal and state health coverage laws (e.g. HIPAA, The Civil Rights Act, The Women’s Health and Cancer Rights Act, The Mental Health Parity and Addiction Equity Act, etc.). As such there are various benefit requirements that affect how AHP insurance coverage is configured. Alongside state-specific benefit rules and mandates, the federal laws governing AHPs require them to:

  • Cover pre-existing conditions for every covered medical service category that corresponds to an Essential Health Benefit
  • Cover preventive care services without charging co-pays or deductibles
  • Prohibit annual and lifetime spending limits for every covered medical service category that corresponds to an Essential Health Benefit
  • Cover pregnancy, childbirth, & associated maternity/newborn medical conditions in a fashion similar to other medical conditions insured under the AHP
  • Cover hospital stays of at least 48 hours in connection with childbirth, and at least 96 hours for a caesarian birth
  • Have both internal and external appeals processes regarding benefit determinations
  • Prohibit benefit waiting periods beyond 90 days

As a form of large group business insurance, an AHPs may follow industry practices with respect to benefit design such as having an additional insurance policy that is specific to vision or dental coverage in which workers can voluntarily participate. Large group health insurance typically covers doctor and specialist care, hospitalization, emergency care, lab tests and medical imaging, and prescription drug coverage.

Like other forms of American health insurance, AHPs may deliver benefits through healthcare provider networks such as HMOs, PPOs, or EPOs.

How Is an Association Health Plan Different than a Single Company Health Plan?

An AHP is designed as a single large group health plan serving many small employers. The plan is governed by regularly elected officers or trustees chosen by the businesses belonging to the association sponsoring the AHP. These people design the plan benefits (within the confines of federal and state benefit requirements) and negotiate the costs on behalf of the businesses belonging to the association. In contrast, a single company health plan that is fully-insured has only one employer who is responsible for negotiating benefits and costs with an insurance company.

Can My Spouse and Children Get Covered Through Our Association Health Plan?

An association of employers sponsoring an AHP has the option of extending AHP coverage beyond qualified workers to the spouses, children, and dependents of these workers. If dependent children are made eligible for participation in the AHP then they retain this eligibility for coverage until they reach their 26th birthday.

Does COBRA Apply to Association Health Plans?

Yes for companies of 20 or more workers. AHPs are required to comply with the obligations of the Consolidated Omnibus Budget Reconciliation Act (COBRA). As a consequence, employees eligible for health coverage through their business may continue to participate in the AHP despite termination or reduction in hours for 18 to 36 months depending on circumstances