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Final Rule Lowers Barriers to Forming and Joining Association Health Plans

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On June 19, the Department of Labor (DOL) released its final rule on Association Health Plans (AHP).

The rule will expand access to AHPs and make it easier for an AHP to be classified as a “single employer” bona fide group plan under the Employee Retirement Income Security Act (ERISA). Bona fide plans have greater benefit and coverage flexibility, often avoiding most state and federal benefit and coverage mandates. The Department of Labor (DOL) conceded that this flexibility is likely to adversely affect individual and many smaller group plans but viewed the value to potential AHP enrollees as outweighing the potential negative impacts.

The AHP rule signals the administration’s continued commitment to increasing flexibility on ACA-related coverage and benefit mandates. The DOL’s intent was to give sole-proprietors and small groups some of the same benefit flexibility and economies of scale currently only available to large group plans. However, this treatment could enable larger (50+ member) bona fide AHPs to avoid or reduce the effect of many benefit mandates such as EHBs, maximum out-of-pocket limits, providing a minimum value plan, or covering mental health and addiction services.

The final rule:

  • Reduces the required participation in a trade or business for sole proprietors (“working owners”) to join an AHP from 30 hours/week or 120 hours/month to 20 hours/week or 80 hours/month
  • Allows bona fide AHP members to be part of the same industry/trade or just have a principal place of business in the same geographic region (including across state lines)
  • Requires AHP-sponsors to have at least 1 substantial non-AHP business purpose, a reversal of DOL’s proposal to remove this requirement from ERISA
  • Applies nondiscrimination provisions of the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA) to AHPs
  • Prohibits health insurers, providers, and other healthcare delivery organizations from sponsoring or operating a bona fide group AHP for other employers
  • Emphasizes that AHPs must adhere to benefit and coverage requirements that apply to their group size but expressly will not require all AHPs to apply essential health benefit (EHBs), cost-sharing limit, and minimum value coverage requirements

While the final rule will make it easier to form and join an AHP, DOL’s decision to leave bona fide plan joint control and management requirements unchanged will mean that it may still be challenging for an AHP to be recognized as a bona fide group. Thus, many AHPs may continue to be required to adhere to state and federal individual or group coverage and benefit requirements. However, the rule makes enforcement much more challenging and highly subjective. In many areas, the DOL chose not to define certain eligibility and business terms or clearly spell out AHP control requirements. In others, the DOL created highly subjective safe harbors or flexible requirements that will block or frustrate most enforcement. This may undermine many of the protections against improper AHPs or coverage fraud that the DOL had included in the final rule.

The Congressional Budget Office (CBO) and Avalere projections on the proposed rule show that the changes finalized in this rule are likely to lead to reduced enrollment, higher risk uncertainty, and higher premiums in the individual and small group markets. The DOL concedes that those impacts (along with higher federal deficits) are likely consequences of this rule, but states that the value to potential AHP enrollees outweighs any negative impacts.

To discuss how the expansion of alternative plans, like association health plans, may affect your business, connect with us.

The DOL delayed the effective date of the rule to allow current AHPs to become compliant and to allow new AHPs to form. The final rule will become effective on September 1 for fully insured AHPs and April 1, 2019, for new self-insured AHPs.

To discuss how the expansion of alternative plans, like association health plans, may affect your business, connect with us.

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