Association Health Plans

On June 19, 2018, the Labor Department released a final rule and fact sheet regarding Association Health Plans (AHPs). The rule was in response to an executive order issued by President Trump on October 12, 2017 directing federal agencies to expand the availability of AHPs, short-term plans and Health Reimbursement Arrangements. The rule revises ERISA in order to redefine "employer" to allow more groups to qualify as associations and treating health coverage sponsored by an employer association as a single group health plan that would not be subject to the ACA's essential health benefits. The proposed rule was released in January and NAHU submitted comments on the proposal in March.

The administration opted to grandfather the previous AHP rules themselves. Therefore, the new rules establish new regulations on AHPs that allow for an additional method for forming and operating such a plan, while maintaining the previous pathway and permitting its use even for new AHPs that haven’t yet been formed. Additionally, state regulators will remain involved in the implementation of the rules. The rule further provides special consideration regarding working owners relative to adverse selection and possible special entry dates.

The rule eliminates the requirement that an association exist for a bonafide purpose other than offering health coverage by changing the definition of a bonafide association. Therefore, a bonafide association can be one created for the purpose of offering insurance, but it must offer at least one other service for members. This allows an association to be formed not just with groups that share a common interest, but also groups whose members are in the same trade, industry, line of business or profession, regardless of location, or have a principal place of business within a region that does not exceed the boundaries of the same state or the same metropolitan area. As such, AHPs could cross state lines if the metropolitan area includes more than one state. These plans would be subject to state regulation of insurance and plans across multiple states could be subject to varying rules.

Under the final rule, all employer members of the group would be counted together as a large group – each small employer would not have to be counted based on their own size. It further allows self-employed individuals, sole proprietors and common-law employees, and working owners even if they have no other employees to be considered as both the employer and employee and participate in the AHP.

The proposal includes non-discrimination protections to avoid potential of adverse selection. It requires that the association not restrict membership based on any health factor, as defined in the HIPAA/ACA health nondiscrimination rules. These include health status, medical condition (including both physical and mental illnesses), claims experience, receipt of healthcare, medical history, genetic information, evidence of insurability, and disability.