On Tuesday, the Labor Department released a final rule regarding Association Health Plans (AHPs) as well as a fact sheet on the new rule. The rule was in response to an executive order issued by President Trump on October 12 directing federal agencies to expand the availability of AHPs, short-term limited duration insurance policies and Health Reimbursement Arrangements. The proposal calls for a revision to 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 goal of the rule is to provide small-business owners, employees of small businesses and family members of working owners/employees more coverage options, more affordable pricing, enhanced ability to self-insure, less regulatory burden and complexity, and reduced administrative costs. The Congressional Budget Office estimates that 4 million Americans, including 400,000 who otherwise would lack insurance, will join an AHP by 2023.
The final rule does not differ much from the proposed rule that came out in January, of which NAHU specifically sought and received clarification on several issues. The administration opted to grandfather the previous AHP rules themselves after NAHU requested that any AHPs currently operating be grandfathered. 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, we received clarification that we sought on several definitions and that 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 was not included in the proposed rule). 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. The Department of Labor has committed to continue partnering with states to protect consumers and enforce state regulations.
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 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 final rule has staggered dates for implementation:
- All associations (new or existing) may establish a fully insured AHP on September 1, 2018
- Existing associations that sponsored an AHP on or before the date the final rule was published may establish a self-funded AHP on January 1, 2019.
- All other associations (new or existing) may establish a self-funded AHP on April 1, 2019.
The day after the new rule was issued, a group of attorneys general, led by New York and Massachusetts, announced that they plan on pursuing legal action against the Trump Administration, claiming that the rules “invite fraud, mismanagement and deception.” While the states do not disagree with the law’s ability for states to regulate the plans, they contend that plans that are sold across state lines would weaken the individual markets within the states and that the final rule is both “unlawful and would lead to fewer critical consumer health protections.”
NAHU will continue to provide our members with guidance on the implementation of this new rule, and will work with both state and federal policymakers as they oversee the offerings of these new AHPs.