On June 19, the Department of Labor (DOL) released a final rule that makes it easier for small employers to join together to purchase health insurance.
By forming these benefit arrangements, called Association Health Plans or AHPs, small employers can work around certain Affordable Care Act reforms that apply to the small group market. The goal of this rule is to offer small employers more affordable health insurance options. Also according to the DOL, the changes expand access to affordable, high-quality health insurance coverage.
Sound too good to be true? It just might be.
Critics of the rule worry about potential risks to consumers and market stability. In exchange for these lower premiums, AHPs may cover fewer benefits. Most of these AHPs will not be subject to the ACA’s essential health benefits reform. That reform requires small group plans to cover a core set of items and services, such as mental health and maternity and newborn care.
We recommend that employers carefully review the AHP’s benefit design to make sure it’s the right fit for their workforce. Employers should also be mindful of the fact that AHPs are regulated at the federal and state level and the availability of these plans will rely on how a particular state approaches these kind of regulations.
So, where did this final rule come from?
In October 2017, President Trump signed an executive order directing the DOL to consider regulations that would permit more employers to form AHPs in order to expand access to affordable health coverage.
As it stands, the criteria that is required for a group of employers to sponsor a single ERISA plan is very limiting. Under these current rules, the size of each participating employer determines whether the coverage is subject to the small group or large group market rules.
AHPs are a type of multiple employer welfare arrangement that has, historically, been taken advantage of and has a history of defrauding customers. The Affordable Care Act has provisions in place that target these abuses, like improved reporting and stronger enforcement.
As mentioned previously, there are concerns that expanding AHPs will result in potential customer fraud. In their final rule, the DOL notes that it is relying on the close cooperation of state regulators to guard against fraud and abuse.
How will the final rule work?
This reform provides small employers, with a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers.
The rule allows employers to join together to form an AHP that is a single ERISA plan if either of these requirements is satisfied:
- The employers are in the same trade, industry, and profession
- The employers have a principal place of business within a region that does not exceed boundaries of the same state or metro area.
The rule also allows working owners that don’t have other employees to join AHPs.
When it comes to distinguishing single plan AHPs from commercial insurance arrangements, the final rule requires that the following conditions be satisfied:
- The primary purpose of the group may be to offer health coverage to its employees; but, the group also must have at least one substantial business purpose unrelated to offering health coverage or other employee benefits.
- 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 has a formal organizational structure with a governing body and has bylaws or other similar indications of formality
- The group’s member employers control its functions
- Only employees of the current employer members may participate in the group health plan sponsored by the association
- The group is not a health insurance issuer or owned or controlled by an issuer
The final rule also requires AHPs to comply with certain consumer protections and anti-discrimination protections that apply to the large group market. AHPs under this rule will not be able to charge employers different rates based on the health status of their employees.
This rule does not affect existing AHPs that are allowed under the DOL’s current rules. These plans can either continue on as they are or elect to follow the new requirements.
What are the dates to remember?
Sept. 1, 2018: Fully insured plans may begin operating under the new rule.
Jan. 1, 2019: Existing, self-insured AHPs may begin operating under the new rule.
Apr. 1, 2019: New, self-insured AHPs may begin.
Compliance continues to be key.
One of the major stumbling blocks for government contractors is compliance. Keeping up with rules, regulations, and changes is difficult. Especially, once you begin factoring in multiple organizations and the needs of all those employees.
The Boon solution is our flexible, customized employee benefit plans that place the emphasis on compliance. We’ve got 35+ years of expertise and the resources to address any compliance issues that may arise!