Last week, the Department of Labor (DOL) issued a final rule regarding Association Health Plans (AHPs). AHPs have been proposed as a method of offering smaller employer groups and sole proprietors additional access to cost-effective health coverage.
The regulations include the following guidelines for associations that wish to offer health coverage under an AHP:
- The association can be based on common interest (such as industry or trade) or a geographic area (within a state or metropolitan area), and
- The association’s primary purpose may be to offer health coverage, but it must also have at least one “substantial business purpose unrelated to offering and providing health coverage”, such as promoting the common business interests of its members.
The association membership and any offered health coverage cannot discriminate using health factors in the eligibility rules or premiums. The final rule includes examples that illustrate discriminatory practices, such as an otherwise qualified employer that is denied association membership based on the medical claims experience of its employees. Another example illustrates discrimination due to the exclusion or premium surcharge of one eligible individual due to a medical condition. Charging different premiums based on occupation, industry, geographic area, or full-time vs. part-time status is permitted.
The AHP health coverage will not need to conform to the Affordable Care Act requirement to cover essential health benefits (EHBs), which is currently required of small employer and individual plans. Therefore, AHP coverage could be less comprehensive than plans currently offered in these markets. The AHP coverage is still subject to all other key ACA protections, including coverage of pre-existing conditions, no annual or lifetime limits on any EHBs that are included, eligibility for children up to age 26, and preventive care coverage. The AHP health coverage must also still comply with other federal benefit laws, such as special enrollment rights and maternity hospital stays. Fully-insured AHPs are subject to state mandated benefits.
Existing association plans, also known as Multiple Employer Welfare Arrangements (MEWAs), may choose whether to adopt the new rules. By definition, AHPs are MEWAs since they cover employees of two or more unrelated employers. AHPs, like other MEWAs, will be subject to oversight by the states and ERISA, including MEWA registration, Form M-1 filing, and Form 5500 reporting.
The new regulations become effective on September 1, 2018 for fully-insured arrangements, January 1, 2019 for existing self-insured MEWAs that want to comply with the new rule, and April 1, 2019 for new self-insured AHPs. We will keep you posted regarding the developments of any AHPs.
DOL Update: On August 20, 2018, the DOL posted an online resource on ERISA Compliance Assistance.
Maryland Update: On August 20, 2018, the Maryland Insurance Administration (MIA) issued Bulletin 18-15 describing the impact of Maryland law on AHPs. As noted in the Bulletin, the individual states retain authority to regulate both fully-insured and self-insured AHPs.
Under a Maryland law passed in April 2018, all small employers in Maryland will still be subject to the ACA small group market requirement to include coverage of EHBs, even if offered through an out-of-state AHP. Additionally, Maryland requires that insurance carriers be approved by the Commissioner in order to sell coverage to Maryland employers, and that coverage of Maryland residents must comply with Maryland benefit mandates.
Other states may have passed or plan to pass their own laws restricting the impact of the new federal regulations.