The Washington state legislature legalized Association Health Plans (AHPs) in 1995. The idea was to allow employers with 50 or fewer empoyees to buy high quality and affordable health insurance in the "large group market." Small employers could band together and form an AHP as long as they were in related industries.

Although AHPs have been very popular in Washington state and have provided reasonably-priced health insurance to hundreds of thousands of people, the Insurance Commissioner has never been a fan. Commissioner Kreidler believes AHPs "cherry pick" only healthy people and exclude sicker individuals. In 2007, he imposed stricter rating requirements which eliminated health underwriting for AHPs. The plans sued and the court ruled in favor of the AHPs.

The Affordable Care Act (ACA), or Obamacare, imposed a new rating requirement called "community rating" for all health insurance plans sold in the U.S. Except in very specific cases, this requirement means insurance companies can not charge more for sick individuals and can not charge a significant difference for older people.

Commissioner Kreidler, using the community rating requirement in the ACA, has again reviewed AHPs in Washington state. There were over 60 AHPs with 500,000 members in our state when the ACA passed. He has established a two part test. First, associations must have been formed for purposes other than buying health insurance and second, associations must abide by the community rating in the ACA. As of two weeks ago, 11 plans qualified, 19 plans failed the first test, 22 failed the second test and nine were under review.

Multiple plans have filed lawsuits against the Office of Insurance Commissioner (OIC), the latest being the Association of Washington Businesses (AWB). The basis of these lawsuits is that the ACA does not supersede existing federal laws, for example ERISA and HIPAA, which outline rating methodology. Using existing laws, AHPs can use health underwriting and can maintain quality insurance at lower costs.

If the OIC is truly concerned about older and sicker individuals, there are better and more cost effective ways of dealing with these patients. High risk pools, for example, offer a solution for people with greater medical needs. Eliminating AHPs penalizes all members who have enjoyed quality health insurance at affordable prices.