Small Employers at a Breaking Point

In many cases, a small business buying health benefits is trapped. While large corporations are most often self-funded and can negotiate high-value health plans, small shops are forced into the small group, fully-funded market where annual premium hikes of 20 to 30 percent have become the norm. Unfortunately, this can force employers to choose between offering health benefits and keeping their doors open.

Grace Brangwynne, Policy Director for Healthcare, Insurance and Housing at the Connecticut Business and Industry Association (CBIA), described this as a breaking point. On a recent episode of Moving to Value Unscripted, Grace unpacked the CBIA’s advocacyin the Connecticut legislature for one potential solution, Association Health Plans.

What Are Association Health Plans?

Association Health Plans (AHPs) are insurance arrangements that allow small businesses and nonprofits to pool their risk. By aggregating under one umbrella, often via a sponsoring association like a local chamber of commerce or a qualifying trade association, smaller entities can procure health insurance as if they were one large employer.

Often structured as Multiple Employer Welfare Arrangements (MEWAs), these plans can be governed by a trust with a fiduciary duty to the members. This fiduciary structure is critical: unlike traditional broker relationships where incentives may be misaligned, a trust governing an AHP has a legal obligation to act in the best interest of its members — prioritizing value over volume, transparency over opacity.

Market Flexibility

Supporters of AHPs view them as a crucial tool for restoring economic viability to the state's small business sector.

• Leveling the Playing Field: Supporters argue that small businesses deserve the same economies of scale as large corporations.

• Industry Customization: AHPs allow specific sectors like childcare or manufacturing to create plans tailored to the unique health needs of their workforce.

• Bypassing the "Small Group" Trap: Advocates believe competition can break the cycle of double-digit premium increases on the state exchange.

Regulatory Concerns

Critics worry about how these plans might destabilize the broader insurance market and impact vulnerable populations.

• Market Fragmentation: Critics worry that if healthier small business employees leave the state exchange for AHPs, the remaining "sicker" pool will face even higher costs.

• Protections for Pre-existing Conditions: There are concerns that moving away from ACA-standardized pools could erode protections for those with chronic illnesses.

• Financial Stability: Opponents point to the history of some national MEWAs failing, leaving employees with unpaid medical bills if the trust is not properly capitalized.

Building In Guardrails

Grace addressed these concerns directly by highlighting the CBIA’s work building protections into the current Connecticut proposal.

• Mandatory Non-Discrimination: The bill forbids denying coverage or charging higher rates based on pre-existing conditions.

• Composite Rating: Every employee in a participating group receives the same rate, ensuring fairness across the board.

• Fiscal Strength: To prevent insolvency, the bill requires sponsoring associations to maintain $4 million in capital reserves and hold robust stop-loss insurance.

Legislative Push

The debate over AHPs in Connecticut reflects a larger national struggle over the future of the American healthcare marketplace and in particular, employer sponsored health benefits. Connecticut would join a handful of states, including Maine, Virginia and New Jersey, that are testing AHPs, and could provide a bipartisan blueprint for states across the country to stabilize their own shrinking small-group markets. 

Grace was optimistic about bringing AHP authority to Connecticut, adding that human stories help illustrate the urgent need for legislative solutions. For AHPs to cross the finish line, she said, the voices of small business owners must be louder than the policy gridlock.

The question for Moving to Value Alliance members is whether AHPs can be structured to reward quality and outcomes, not just lower premiums. If small businesses pool their purchasing power, will they use it to demand better care coordination, transparent pricing and accountability for results? Or will AHPs simply replicate the same fee-for-service dynamics at a different scale? Our conversation with Grace and her emphasis on fiduciary duty and member protection suggests the former is possible, but will require intentional design and ongoing oversight.

Listen to our full conversation with Grace to learn more.

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