June 19, 2018, the Department of Labor (DOL), after considering over 900 comments on the proposed rule released a final new rule for association health plans (AHPs) and launched a webpage on AHPs. AHPs are group health plans that employer groups and associations offer to provide health coverage for their members’ employees. This new rule will provide additional ways for employers to get health coverage from AHPs.
This new AHP rule is a result of the President Trump’s Executive Order issued in October 2017, which among other things instructed the DOL to consider expanding the current rules regarding AHPs.
What is an Association Health Plan (AHP) under the new regulations?
Association Health Plans are arrangements that permit multiple employers to band together in order to purchase health coverage under certain criteria. The group or association will be treated as a single employer sponsoring a multiple employer welfare arrangement (MEWA) for purposes of providing the group health benefits. Smaller employers that can join a collection of small employers under an association health plan can tap into greater purchasing power by tapping into the large group market and gain cost savings that would not have been available as a single small employer.
What are the requirements for a group or association of employers to be considered a single employer for purposes of offering a group health benefit?
The group or association requirements:
Primary Purpose. The AHP exists for the purpose of sponsoring a group health plan for its employer members, and has at least one substantial business purpose unrelated to offering group health benefits.
Organizational Structure. AHP must have a formal organizational structure with a governing body. The group or association’s functions and activities (including starting and maintaining a group health plan) are controlled directly or indirectly by its employer members.
Commonality of Interest. The final AHP rule amends the definition of “employer” under the Employee Retirement Income Security Act (ERISA) to include an association of employers linked by industry or geography that is formed to sponsor a group health plan for its employer members. The employer members must have a commonality of interest by either by 1) being employers in the same trade, industry, line of business or profession, or 2) having a principal place of business in the same state, metropolitan area, or multistate metropolitan area.
Participation criteria. AHP employer members must each employ at least 1 employee covered under the health plan under the AHP. The group health plan is only available only to employees (including certain working owners) and former employees of AHP employer members and their family members and other beneficiaries. The final rules for the first time allow “working owners” to participate in an AHP.
Nondiscrimination protections built into final rule. The health coverage must be in compliance with certain nondiscrimination requirements that prohibit discrimination based on health factors.
Insurers cannot sponsor AHPs. The group or association cannot be a health insurance issuer or owned or controlled by a health insurance issuer.
Additional updates in the final rule. HIPAA’s wellness program provisions apply to AHP coverage, which allows AHPs to vary benefits and employee contributions based on whether an individual satisfies a wellness program’s standards.
The new regulations will become effective at different times based on the type of health coverage provided by an AHP.
The regulations become effective:
- On September 1, 2018, for fully-insured AHPs;
- On January 1, 2019, for already existing self-insured AHPs that choose to meet the new regulations’ requirements; and
- On April 1, 2019, for new self-insured AHPs.