Health & Life Insurance Actuaries | Lewis & Ellis Inc.

Why Association Health Plans Need the Use of an Actuary

The workforce of the United States is shifting. More than a third of Americans are freelancing in some capacity, according to Forbes. It’s estimated that more than 50% of Americans will be freelancing by 2027. And many of those freelancers will rely on an association for services, such as their health plan.

While certainly not all of these freelancers are depending on it as their primary source of income, it does speak to the trends developing in the U.S. when it comes to independent employment. For those who are freelancing full-time, or entrepreneurs with small businesses, there’s more to think about than just company logistics. When you aren’t employed by a corporation, it falls on you to find yourself a suitable health insurance plan offering the coverage you need.

Freelancers and entrepreneurs often turn to Association Health Plans (AHP) for their health coverage needs. Under the Department of Labor’s rule, associations offer these plans to their members, giving members purchasing power due to the group’s size. 

According to, it’s an attractive option for small businesses due to the current lack of regulations by the Affordable Care Act (ACA).

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. –

Given the confusion that can sometimes surround association health plans – especially considering President Donald Trump’s recent upheavals of AHP regulations – it’s crucial to understand every aspect when planning to launch an AHP. 

For this reason, utilizing an actuary can be an important step in managing risk and making the best decisions possible. 

Reasons to Use an Actuary for Association Health Plans

1. Lack of actuarial staff

Unlike large health insurance companies, association health plans don’t often have an internal actuarial staff department, nor do they have the data and models necessary to price and manage their Health Plan risk.

When it comes to health care, actuaries are an important asset. The health insurance committee of the American Academy of Actuaries – the independent, unbiased trade association – recently released a paper regarding the state of the American health insurance market. It outlines suggestions for the future, including balanced risk pools, ample competition, and reliable regulations. 

As specialists in managing risk on the health care front, actuaries are an indispensable resource.

2. Launching plans from scratch

New association health plans have no history. And therefore, no track record to speak of. Let’s face it, it can be hard to get anyone to buy into a product or service with no proven performance, especially in today’s consumer-review focused society. 

Actuaries can help to bridge the gap between having a lack of previous performance history and being an attractive plan for the future. Actuaries have all the necessary knowledge to get an AHP up and running. 

They can help with such items as:

The management of a health insurance plan, even an AHP, is no small undertaking. When starting from scratch, there’s no built-in network with the proper knowledgeable insurance resources to help make decisions. A health actuary can advise the AHP provider about policies based on risks, the current healthcare landscape, and more.

3. No internal resources or actuarial tools

At, an entity wishing to start a new AHP can learn all about the process, from determining the scope of membership, to commonality of interest, to registration and filings. However, the logistics of managing the AHP after registering paperwork are more open-ended, even more so in recent years. 

Investopedia has named health care to be one of the top five industries driving the U.S. economy. It’s number one, in fact. And, based on the complexity of the landscape, Investopedia includes health insurance as well as technology and health services. 

Though historical data is usually a key aspect in the process, actuaries also use external databases and reports, as well as online publications and new research, to assist in developing the association health plan.

Actuaries use this data to develop tools to price, report, and manage your risk.  Having these tools at your disposal goes a long way towards building a stable rating environment.

4. External forces, such as politics

Under the ACA, all health plans – including AHP – were required to cover 10 essential health benefits (EHB). These include: 

Since President Trump signed an October 2017 executive order, these benefit requirements for AHP have been scaled back and AHP are no longer considered ACA plans. 

As the government continues to debate the future of U.S. health care, it’s important to recognize the uncertainty of the American health insurance market. Working with an actuary means preparing for the future based on data, statistics, and trends – rather than being concerned with partisan politics.

5. Lack of compliance staff

Association health plans are primarily regulated by the Employee Retirement Income Security Act of 1974 (ERISA) and state regulations. And the health care regulation industry is continuing to grow. Regulators will come into contact with health insurance plans – regardless of whether they’re AHP or not. 

The Bureau of Labor Statistics predicts an 8% increase in compliance staffing needs by 2026. In an association health plan, there are seldom compliance staff members to ensure the AHP’s adherence to laws, regulations, and guidelines. 

Many actuaries are experts in compliance testing under regulations such as ERISA. Using an actuary can help your AHP avoid compliance violations. Not only can violations lead to legal punishment and fines. But they also could lead to a loss of reputation for your association.

As the health care landscape changes in the U.S. and a larger number of employees begin to work independently, association health plans will certainly continue to be an increasingly popular option for health care coverage. 

When AHP make use of actuaries, they can be assured that they’re working with a highly-qualified professional who is an expert in the healthcare industry. No matter how much things change.

Contact us for more information.

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Caption: What will a growing population of freelancers mean for Association Health Plans?

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Association health plans are increasingly popular in the U.S. with freelance workers. Learn why to make use of an actuary for association health plans.

Consultants to Contact

Christopher J. Merkel, Senior Vice President (Kansas City)