U.S. Department of Labor Issues New Rules Concerning Association Health Plans
The U.S. Department of Labor (DOL) recently issued final regulations that expanded the availability of association health plans ("AHPs").
An AHP is an arrangement that allows small businesses to band together to obtain healthcare coverage as if they were a single large employer. An AHP that is properly structured will avoid many requirements that apply to the individual and small group insurance markets under health care reform, such as essential health benefits, single risk pools, restrictions on risk underwriting, and medical loss ratio provisions.
The new regulations allow more employer groups and associations to form AHPs. Some of the changes that were implemented by the new regulations are listed below.
- In order to form an AHP, employers must satisfy both a "commonality of interest" test and a "control" test. In contrast to prior DOL guidance, employers may now satisfy the "commonality of interest" if the employer members are either (1) in the same trade, industry, line of business, or profession; or (2) have their principal place of business in the region that does not exceed the boundaries of the same state or the same metropolitan area—even if the metropolitan area includes more than one state.
- In contrast to prior regulations, an association may have the "primary" purpose of offering and providing health coverage. However, the association must have at least one "substantial" purpose unrelated to offering and providing health coverage.
- The new regulations permit sole proprietors and other self-employed individuals to participate in an AHP if certain requirements are met. To qualify, a working owner must either (1) work at least 20 hours per week or 80 hours per month in the applicable trade or business; or (2) have wages or self-employment income from the trade or business that at least equals the cost of coverage for the owner’s plan participation (including participation by any beneficiaries).
The DOL is phasing in effective dates for the new rules, which will take effect (or have taken effect) on:
- Sept. 1, 2018 for fully insured plans;
- Jan. 1, 2019 for existing self-insured AHPs; and
- April 1, 2019 for new self-insured AHPs.
There are several issues to consider before joining or forming an AHP. For example, certain AHPs in Michigan are subject to the Michigan Multiple Employer Welfare Arrangements ("MEWA") Act. AHPs that are subject to the Michigan MEWA Act are required to apply for a Certificate of Authority from the Michigan Department of Insurance and Financial Services ("DIFS"), file certain information with DIFS on an annual basis, and maintain a certain level of cash reserves. Additionally, an AHP cannot discriminate on the basis of any health status factor, and may not separately rate each participating employer group based on any health status factor.
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