DOL Proposes Expansion of Association Health Plans
Following up on the direction provided by Executive Order 13813, the U.S. Department of Labor (DOL) has issued proposed regulations that would expand the ability of small employers to band together and provide coverage under a single Association Health Plan (AHP). Under the new rules:
AHPs may be formed by employers that are engaged in the same trade, industry, line of business, or profession, or that are located in the same state or metropolitan area (even if the metropolitan area crosses state lines).
Where current rules provide that an association may be treated as a single employer only if it has a bona fide purpose apart from the provision of health coverage, an AHP may be created solely for the purpose of providing health coverage to the employees of its members.
AHPs may also be established by employers who meet "commonality of interest" criteria under existing guidance that would allow their association to sponsor a single health plan for its members.
Although aimed principally at small employers, no size limit applies to employers seeking to form or join an AHP.
Consistent with existing rules, the association must have a formal structure, and its functions, including the maintenance of the AHP, must be controlled, directly or indirectly, by association members. In addition, participation in the plan must be limited to the employees of the association's members and their beneficiaries. These criteria aim to ensure that the association acts in the interest of its members and distinguish the arrangement from commercial insurance.
The proposed guidance expressly permits sole proprietors (and their family members) to participate in an AHP if they meet specified criteria regarding genuine engagement in their business and the absence of any other subsidized group health coverage.
AHPs will be subject to certain requirements that prohibit discrimination on account of adverse health factors.
The rules principally aim to allow small employers to enjoy some of the advantages of larger employers with regard to health coverage, including favorable insurance rates, economies of scale, and more specialized management. AHPs that are sizable enough would gain an additional advantage—they would cease to be subject to legal requirements that apply only to individual coverage or insured coverage in the small group market, such as the ACA requirement to cover essential health benefits.
As proposed, the rules do not change the regulations governing multiple employer welfare arrangements (MEWAs). The DOL is considering this matter further, but currently AHPs are seen as a form of MEWA that would be subject to applicable state insurance regulations.