By: Erin M. Hussey, Esq.
Since the final Association Health Plan (AHP) rules were issued in June, many states have opposed them arguing they would create adverse selection. The argument is that healthy individuals would join AHPs as a cheaper option, because they do not have to cover certain benefits such as essential health benefits (EHBs), while unhealthier individuals would join the individual and small group markets for more robust coverage. As a result, the more people that move from the individual and small group markets, in order to join AHPs, will cause an increase in premiums for those markets making it less affordable for unhealthy individuals who stay on them. In addition, Massachusetts Attorney General Maura Healey argues that the new rules are unlawful as they will create deception, fraud and mismanagement.
The final AHP rules have also left states with more questions than answers. As a result, states have recently been taking their own actions with the continued lack of guidance from the U.S. Department of Labor (DOL). For example, Michael Pieciak, Vermont Commissioner of the Department of Financial Regulation, issued an emergency regulation on August 1st stating, among other things, that fully-insured AHPs must offer EHBs. Additionally, on August 2nd Jessica Altman, the Pennsylvania Insurance Commissioner, sent a letter to the secretaries at the DOL and Health and Human Services (HHS) stating that AHPs must comply with ACA individual and small group market rules and ACA benefits and protections. This is in stark contrast to the AHP final rules which detail that an employer member who is considered a small employer would be able to avoid the small group market rules, such as covering EHBs, by joining an AHP that would constitute as a large employer or by joining a self-funded AHP. The final AHP rules attracted small employers since they would have the opportunity to offer large group market health coverage to their employees, but some states could make it difficult to do so.
With the final AHP rules becoming effective on August 20th, it is expected that states will continue to take matters into their own hands without further guidance from the DOL. As states continue to challenge the ability for AHPs to operate under the new rules, it is likely that lawsuits will be brought by business groups and individuals who seek to operate an AHP under the new rules.
By: Jen McCormick, Esq.
On January 5, 2018, the Department of Labor (DOL) responded with a proposed regulation which would extend the circumstances in which an association may function as an “employer” under ERISA, and would alter the way in which it would be regulated. The proposed regulations make two important modifications: (1) create a unique dual status for working owners and (2) modifies the interpretation of the commonality of interest requirements. The “dual status” requirement would permit a working owner or sole proprietor to function as both the employer for purposes of joining the association and as the employee for purposes of being covered by the plan. The “commonality of interest” requirement would allow formation of an association for the purpose of offering health insurance. The rule does not impose prohibitions on forming new associations (or specify size limitations), but it does provide formal organizational requirements for associations. While it may seem this rule will not have a major impact on self-funding, these two changes will expand the pool of employers who may be eligible to create, join or establish a self-funded. This could create new opportunities.