On Thursday, the Department of Labor released a proposed rule on the expansion of association health plans. The rule was in response to an executive order issued by President Trump on October 12 directing federal agencies to expand the availability of association health plans (AHPs), short-term limited duration insurance (STLDI) policies and Health Reimbursement Arrangements (HRAs). The proposal calls for a revision to ERISA in order to redefine “employer” to 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. An estimated 11 million uninsured Americans could gain insurance under this expansion. NAHU plans to submit detailed comments on the proposal, which are due on March 6.
The proposal calls for eliminating the requirement that an association exist for a bona fide purpose other than offering health coverage. To qualify under the proposal, employers would need to be either in the same trade, industry, line of business, or profession; 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. Therefore AHPs could cross state lines if the metropolitan area includes more than one state, such as the greater metropolitan areas of New York City, Chicago, or Kansas City. However, the plans would be subject to state regulation of insurance and plans across multiple states could be subject to varying rules. The proposal is considering applying an existing federal designation, such the U.S. Census metropolitan statistical areas, to determine eligibility boundaries for AHPs.
This provision of the proposal is aimed at allowing the campaign promise of “selling across state lines”, although it is very limited. NAHU has strong concerns about any intention to sell insurance across state lines, and believes in the state regulation of insurance. State systems are accessible and accountable to the public and sensitive to local social and economic conditions. State regulation has proven that it effectively protects consumers and ensures that promises made by insurers are kept. Insurance regulation is structured around several key functions, including company licensing, producer licensing, product regulation, market conduct, financial regulation and consumer services that all vary by state. As we prepare our comments we will emphasize the important role of state oversight in the health insurance market and our interest to not see that diminished by this rule.
The proposal continues existing guidance under ERISA to ensure that organizations have the organizational structure necessary to act in the interest of participating employers. It would require that the association have a formal organizational structure with a governing body and by-laws, and that the group or association's member employers control its functions and activities. This would include the establishment and maintenance of the group health plan, either directly or through the regular election of directors, officers, or other representatives. Associations would only be permitted to offer coverage to employees and former employees of employer members (and family/beneficiaries of those employees and former employees).
Self-employed individuals, sole proprietors, and common law employees would be permitted to join an AHP. These individuals would be treated as an employee of the trade or business for purposes of being covered by the AHP. Eligible individuals must earn income from the trade or business, and provide at least 30 hours of personal services to the business per week or 120 hours per month, or have earned income from the business that at least equals the cost of coverage under the group or association’s health plan. The individual cannot be eligible for other subsidized group health plan coverage under a group health plan sponsored by any other employer or by a spouse’s employer. There are industry concerns by many, including NAHU, that allowing individuals, even as sole proprietors to join an AHP will dilute these groups and cause issues of adverse selection by merging these markets. This will be another focus of our comments to the DOL in March.
The proposal includes non-discrimination protections to avoid potential of adverse selection. It would require 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. The nondiscrimination rules allow group health plans to treat participants and beneficiaries as distinct groups, but does not permit treating member employers as distinct groups of similarly-situated individuals.
NAHU will be working with our members of the Legislative Council and Employer Working Group to provide comments to the DOL as well as examples of best practices already in place for AHPs that could be reinforced through the proposed rule in order to provide comments that will assist the DOL in compiling a final rule that will truly work to stabilize the market.