The Department of Labor (DOL) has unveiled the much-anticipated final version of a rule that allows more small businesses and self-employed workers to band together to buy health insurance — and may have dropped a small hint about retirement multiple employer plans (MEPs).
The association health plan (AHP) final rule will, according to the DOL, help “millions of working Americans gain access to quality, affordable health insurance for themselves and their families.”
Federal regulations had made it difficult for association health plans to meet ERISA's large-employer insurance requirements, and many existing association plans had to comply with small-group and individual insurance market regulations. Moreover, small businesses and self-employed workers had to be part of the same industry to form an association health plan under the previous rules, but the new rule allows workers in unrelated professions to band together to obtain coverage through an association health plan so long as they are in the same geographic region.
In unveiling the final rule, the DOL explains that, in addition to providing more choice, the new rule makes insurance more affordable for small businesses, and that these plans will be customizable to tailor benefit design to small businesses’ needs. The DOL says that these plans will also be able to reduce administrative costs and strengthen negotiating power with providers from larger risk pools and greater economies of scale.
The Final Rule
The final rule largely mirrors earlier proposals, though there were some modifications based on the 900-ish comments received. The final rule changes the DOL's take on ERISA’s definition of “employer” to include “employer association.” Specifically, under the proposed rule, employer groups or associations would meet the commonality of interest criteria if their members were in the same trade, industry, line of business or profession, or maintained their principal places of business in a region that does not exceed the boundaries of the same state, or in the same metropolitan area (even if the metropolitan area includes more than one state). The final rule also:
- requires that the AHP be controlled by the employer members, both in form and operation; and
- permits AHPs to exist primarily to provide health coverage but requires them to also have an unrelated substantial business purpose, such as organizing conferences or educational opportunities.
Significantly, the final rule confirms that AHPs can either take advantage of the options in the new rule or follow earlier AHP guidance.
According to the DOL, the consumer protections and health care anti-discrimination protections that apply to large businesses will also apply to AHPs organized under this rule, which will be monitored by the Department’s Employee Benefits Security Administration. States will continue to share enforcement authority with the federal government. That said, opponents have portrayed the expansion as undermining the protections and required coverage of “essential health benefits” under the Affordable Care Act (ACA).
A Mercer analysis notes that the final rule adopts modified HIPAA nondiscrimination requirements that:
- prohibit conditioning employer membership in an association based on a health factor;
- require AHPs to prohibit discrimination on the basis of a health factor as to eligibility for benefits and premiums or contributions; and
- prohibit AHPs from using experience rating to determine premium rates for a particular employer member on the basis of a health factor – but allow distinctions based on non-health factors such as industry or geography. Additionally, the rule allows an AHP to pass through different premium charges to its members’ employees based on non-health factors (e.g., full-time/part-time status and occupation), and prohibits distinctions based on non-health factors used as a subterfuge for health status discrimination.
The rule also allows association health plans made up of members of the same industry to offer coverage to workers across the country. Self-employed workers can join association plans under the new regulation, and groups that want to form an association plan don’t need to have another purpose beyond providing health coverage to members.
The DOL says that it expects that a “substantial” number of uninsured people will enroll in AHPs because the DOL expects that the coverage will be more affordable than what would otherwise be available to them, and other people who currently have coverage will replace it with AHP coverage because the AHP coverage will be “more affordable or better meet their needs.” The Congressional Budget Office has predicted that 400,000 people who would have been uninsured will enroll in AHPs and 3.6 million people will enroll in AHPs who would have had other coverage.
There will be a staggered implementation: an applicability date of Sept. 1, 2018, for fully insured AHPs, an applicability date of Jan. 1, 2019, for existing self-insured AHPs complying with the DOL’s pre-rule test, and an applicability date of April 1, 2019, for new self-insured AHPs formed pursuant to this final rule. The DOL says it has concluded that a staggered approach to implementation of this final rule is “consistent with the objective of allowing stakeholders, including States and State insurance regulators, an appropriate amount of time to tailor their groups, associations, plans, and regulations to the final rule and to address a range of oversight and compliance assistance issues, especially with respect to self-insured AHPs.”