Could small-business Association Health Plans cause adverse selection?
No. The 1996 HIPAA law prevents adverse selection in Association Health Plans, stating that no group health plan may deny or condition coverage on health status. Moreover, AHP legislation contains provisions to further protect against any possibility of adverse selection. AHPs must actively market to and accept all member employers regardless of the claims history or health status of their employees. AHPs are prohibited from excluding or charging higher premiums for sick employees, and are restricted from setting their premiums in a way that might force higher claims companies to pay higher premiums than other similarly situated employers in the plan. In addition, only bona fide associations, which are formed for purposes other than providing health insurance for at least three years, qualify to offer an AHP.
