association health plan

What is an association health plan?

Associations can offer group health insurance plans known as association health plans, or AHPs. The idea behind an AHP is to let small businesses in the same industry join together to offer what essentially amounts to large group coverage, rather than each small business having to obtain its own small group plan.

This is an attractive idea for some small businesses (primarily those with healthy employees), because the ACA places far fewer regulations on large group plans. While small group plans have to cover the essential health benefits and cannot base premiums on the group's medical history, those rules do not apply to large groups.

In 2018, the Trump administration finalized new rules to expand access to AHPs. The new rules called for allowing sole proprietors to join AHPs, allowing associations to be formed primarily for the purpose of providing AHP health coverage (as opposed to a primary business purpose), and allowing associations to be formed either based on a commonality of business interest (as was already allowed) or based on sharing a common geographic location.

These rules were soon vacated by a judge, and the Biden administration rescinded the 2018 rule in 2024.¹ But since the 2018 rule had been vacated years earlier, there were no significant changes when the rule was rescinded. AHPs continue to only be available to small businesses (not sole proprietors) that share a common industry (not just a common geographic area), and the association must be formed for a purpose other than providing health benefits.