Association Health Plans: New Proposed Rules
Last Thursday, the Department of Labor released a proposed rule on the expansion of association health plans in response to the Trump administrations executive order in October 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 would redefine “employer” allowing more groups to qualify as “associations” and treating health insurance sponsored by an association as a single group health plan that would not be subject to the ACA’s essential health benefits.
The proposal would eliminate the need for an association to exist for a purpose other than offering health insurance to its members. 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. This achieves the campaign promise of “selling across state lines,” but the guidelines built into the proposal would severely limit this in actuality. The defined borders associated with a “metropolitan area,” as well as the application of multiple state regulations, could severely hamper the ability to develop a successful multi-state association plan. KBM Management, and its trade association partners, have concerns about the impact this kind of cross-state selling could have on the viability of the health insurance market. More to come on that issue.
ERISA would still be the guiding regulation for association health plans in order to ensure appropriate organizational structures designed to protect participating employers. A formal organizational structure would need to be maintained, including a governing body, by-laws, the establishment of a qualified health plan, and the election of directors, officers, and other representatives.
The proposal offers hope for the self-employed individuals and sole proprietors who are currently forced into the individual market based on insurance companies applying IRS definitions for who is, and who is not, an “employee.” These individuals, based on the proposal, would be able to join an AHP due to their being employed in a qualifying trade or business, giving them access to the group health insurance rates offered by the AHP. They would need to prove they’re actively working on a full time (30 hour per week or 120 hours per month) basis, or at least have earned income equaling the cost of coverage. However, the acceptance of individuals as employees in AHPs presents concerns about group dilution and adverse selection. Something that could quickly unravel a poorly run, or administered, AHP.
We’ll be monitoring this issue and report back on the outcome of requested comments by trade and industry groups due by March 6. Please contact KBM Management if you have questions about how AHPs could affect your business in the future.
*Thanks to the National Association of Health Underwriters for research and material