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What Are Association Health Plans?

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On January 4, the Department of Labor (DOL) issued a proposed rule to allow certain self-employed individuals, small businesses, and large businesses, including as part of a professional/trade organization or chamber of commerce, to band together to provide health insurance for their employees and their dependents.

Specifically, the rule proposes to expand access to Association Health Plans (AHPs) and make it easier for AHPs to be able to avoid some state and federal coverage and benefit mandates currently required by the Affordable Care Act (ACA). The proposal could also allow AHPs to sell insurance across state lines, so long as it is within the same metropolitan area.

The proposal comes as a response to an October 12, 2017, Executive Order (EO) instructing the Secretary of Health and Human Services (HHS) to “expand access to more affordable [health insurance] options.” To comply with the EO, the DOL proposes to make it easier for an AHP to be classified as a “single employer” under the Employee Retirement Income Security Act (ERISA). Classification as a single employer would allow the AHP to have greater benefit and coverage flexibility by allowing the AHP to avoid some state and federal benefit and coverage mandates (such as essential health benefit and mental health parity requirements). Although the proposal seeks additional flexibilities for AHPs, it would maintain some consumer protections. Notably, it would not allow the AHPs to exclude any employee or group due to health status or develop premiums based on health risk. However, AHPs could charge differing premiums based on non-health factors (such as age, geographic location, or profession).

If implemented, the proposed changes could offer a new insurance option to millions of consumers, but may also adversely impact the stability of the individual and small group markets. If comparatively younger and healthier consumers enroll in AHP coverage and leave the individual and small group markets, the risk pool of the existing individual and small group market could be negatively impacted.

Comments on the proposed rule are due by March 6.

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