Raising the capital required to start an association or multiple-employer health plan may prove to be the biggest “show stopper” that keeps the concept from gaining renewed interest in Iowa, says Rick DeBartolo, senior vice president of LMC Insurance and Risk Management. 

The U.S. Department of Labor in January proposed new rules making it easier for states to allow small employers to form association health plans and multiple employer welfare arrangements. Subsequently, a state law was passed this year that went into effect in July. That cleared the way for new rules issued by the Iowa Insurance Division in September, which spell out requirements for companies to form association health plans. 

As of mid-October, no established associations or employer groups have been certified by the Iowa insurance commissioner under those new rules, but there has been some interest expressed, according to Iowa Insurance Division spokesman Chance McElhaney.  

The West Des Moines insurance brokerage announced last week that it will team up with Wellmark Blue Cross and Blue Shield to offer a new health insurance pool beginning in 2019 for companies with between 51 and 500 employees. It’s not, however, an AHP or MEWA, but rather a strategy to help smaller companies by giving them more voice in their health insurance program and drive lower costs through better consumerism. 

There are currently just three association health plans operating in Iowa — the Iowa Bankers Benefit Plan, the PMCI Trust and the Cooperative Welfare Benefits Plan. DeBartolo said he has spoken with numerous other associations about forming an AHP or MEWA, but the conversation usually ends after hearing about the capital requirements. 

“I think it has more sizzle than may materialize, unfortunately,” DeBartolo told me during an interview recently. “Every other association that has tried to do that, they look at the financial requirement to start [the plan], and the conversation’s over. There’s no way they can raise that kind of capital.” 

The financial requirement is the greater of 10 percent of premiums or $500,000, plus whatever an actuarial firm determines are the reserves needed if you ever needed to shut it down and pay off remaining claims. 

“So you’d be well over $1 million to get one funded, if you’re an association of any size,” DeBartolo noted. “And then trying to get your members to say they’re willing to do that, but I can’t tell you what the rates are going to be — it’s kind of a chicken-and-egg kind of thing.”