On October 12, 2017, President Trump signed an executive order aimed at expanding the rules for Association Health Plans (AHPs). This executive order directed the Department of Labor (DOL) to consider issuing regulations permitting more employers to form an AHP and by doing so this would expand the access to affordable health coverage for small employers.
On June 19, 2018 the Department of Labor released its final rule which gives more freedom to small businesses to join together and form AHPs to purchase health insurance in the large group market.
Who is Eligible?
The final rule allows employers to join together to form an AHP that is a single ERISA plan if either of the following requirements is satisfied:
- The employers are in the same trade, industry, line of business or profession; or
- The employers have a principal place of business within a region that does not exceed boundaries of the same state or the same metropolitan area (even if the metropolitan area includes more than one state).
In addition, the final rule allows working owners without other employees, such as sole proprietors and other self-employed individuals, to join AHPs.
The current rules that are in place for AHPs are extremely narrow, limiting the number of small businesses that can consider this type of insurance plan.
September 1, 2018 - The final rule applies to fully insured AHPs.
January 1, 2019 - Existing self-insured AHPs can begin operating under the new rule
April 1, 2019 - The final rule applies to new self-insured AHPs.
The Department of Labor says this reform will provide employers that are facing higher premiums with fewer coverage options more ability to join together, gain advantages that large employers have and increase their bargaining power. This expansion is not without it's concerns and criticisms, though. There is concern that AHPs will attract small employers with healthier workers, which has the potential to increase the premiums in small group and individual markets. Additionally some have pointed out that while AHPs have lower premiums they are exempt from some consumer protections under the Affordable Care Act. As an example most AHPs do not have rules that require them to cover a core set of services such as mental health care, maternity and newborn care, prescription drugs and emergency services. Premiums can be based on factors such as industry, age and gender.
There are also conditions that AHPs will have to satisfy in order to distinguish them from commercial insurance-type arrangements.
- The primary purpose of the group or association may be to offer and provide health coverage to its employee members; however, the group or association also must have at least one substantial business purpose unrelated to offering and providing health coverage or other employee benefits to its members.
- Each employer member of the group or association participating in the group health plan must be the employer of at least one employee who is a plan participant.
- The group or association has a formal organizational structure with a governing body and has bylaws or other similar indications of formality.
- The group or association’s member employers control its functions and activities, including the establishment and maintenance of the group health plan.
- Only employees and former employees of the current employer members (and family members of those employees and former employees) may participate in the group health plan sponsored by the association.
- The group or association is not a health insurance issuer (or owned or controlled by an issuer or by a subsidiary or affiliate of an issuer).