Association health plans are plans created by small businesses pooling together, giving them the buying power of larger organizations. This generally results in lower premiums. The Department of Labor has decided to expand the availability of AHPs with a final rule that comes into play on September 1, 2018.
So, how will this effect restaurants? The intent of the rule is to make it easier for businesses to sponsor AHPs, which are often more affordable but less comprehensive than Affordable Care Act compliant plans. Restaurants should be able to join a local association that provides a plan, which should help reverse the trend of fewer restaurants being able to offer health insurance. These do not need to be formal trade groups. The big change is that associations can now be formed solely for the purposes of creating an AHP and buying health insurance. Additionally, the new rules allow working owners to sign on to the plan (typically, owners are not allowed to sign on to company health insurance plans and end up having to buy expensive individual plans).
Typically, restaurants have had particular problems with health insurance. Most restaurants fall into the category of small businesses with 25 or fewer employees, the least likely to provide healthcare for their employees. Many restaurants find that they don’t have the buying power to get premiums that their workers can afford. Surcharges to cover healthcare costs have been tried, but have resulted in restaurants ending up in court for price fixing. Many restaurant employees will choose not to buy health insurance when it is offered, partly because of the cost and partly because the workforce tends to skew towards young, healthy individuals who may not think they need it. This drives premiums even higher, resulting in a vicious cycle.
By joining an association to buy healthcare with other restaurants, businesses can reduce their costs and improve the chances of being able to provide health insurance. However, AHPs do not have to provide the same essential health benefits as other plans and may not be sufficient for some worker populations. Restaurants, because of the natural tendency for both front of house and back of house staff to be young, should have fewer problems in that area and should consider putting together an association to sponsor a plan.