The Department of Labor (DOL) has finalized additional options for employer groups or associations to establish association health plans (AHPs) offering coverage to member employees under a single plan.
The rule was finalized largely as proposed. In response to stakeholder concerns, the agency now will require AHPs to have at least one business purpose other than providing insurance coverage.
This regulation was prompted by President Trump’s October 2017 executive order, which called on agencies to provide additional health insurance coverage options for small businesses; the order specifically targeted AHPs.
The DOL issued this regulation through its authority under Title I of the Employee Retirement Income Security Act (ERISA). The final rule expands the definition of “employer” under ERISA to allow for the adoption and administration of AHPs. Under the rule, sole proprietorships can ban together to form an AHP; individuals or businesses from the same geographic region can form an AHP; and businesses of the same industry can form an AHP, even nationally. The DOL notes that the final rule preserves existing pathways for the formation of AHPs.
The rule continues to distinguish AHPs from other commercial insurance coverage and service provider arrangements. Since AHPs are insured in the large group market or are self-insured, AHPs are not subject to essential health benefit and other comprehensive coverage requirements under the Affordable Care Act.
Further, the DOL reiterated that existing consumer protections and health care anti-discrimination protections will continue to apply to large businesses and AHPs organized under the final rule. The agency reaffirmed its commitment to continue to partner with states to protect consumers. The final rule also does not change the existing roles of state health insurance commissioners in regulating these plans. Under ERISA, state health insurance commissioners have the authority to regulate self-insured plans; Provisions of this final rule do not change that authority.
The Congressional Budget Office estimates that 4 million individuals will seek coverage through an AHP by 2023. Of those, an estimated 400,000 individuals currently are uninsured.
The rule will be implemented in four stages:
- the new rule goes into effect 60 days after publication in the Federal Register on Aug. 20;
- all associations (new or existing) may establish a fully-insured AHP on Sept. 1;
- existing associations that sponsored an AHP on or before the date the final rule was published (June 21) may establish a self-funded AHP on Jan. 1, 2019; and
- all other associations (new or existing) may establish a self-funded AHP on April 1, 2019.
America’s Essential Hospitals made recommendations to the DOL in a March 6 comment letter on a proposed rule altering how AHPs are regulated. The association urged federal officials to ensure AHPs have proper oversight and cover all necessary services for beneficiaries. The association remains concerned that the finalized changes to AHPs could have unintended consequences for essential hospitals and the patients they serve.
Contact Senior Director of Policy Erin O’Malley at firstname.lastname@example.org or 202.585.0127 with questions.