In June, the Trump Administration announced the return of association health plans (AHPs) with the idea that small businesses and other groups will now be allowed to band together to buy health insurance. Such plans would be a more-affordable plans as an alternative to the Affordable Care Act.
Associations that wish to offer an AHP under the new federal regulation might be dismayed to learn that further information will be necessary before a plan can begin enrolling participants.
At the most basic level, an association first needs to ensure it meets the new commonality of interest test, and the employer control test.
Under the commonality of interest, employers within an association can offer an AHP if they are in the same trade, industry, line of business or profession, or have a principal place of business within a region that does not exceed the boundaries of the same state or metropolitan area. The association must also have at least one substantial business purpose unrelated to the provision of health coverage or benefits, even if the health coverage is the primary purpose of the association.
The control test requires that the functions and activities of the association must be controlled by its employer members, rather than an outside entity. Electing a board of directors made up of association members would be sufficient.
All AHPs will be considered a multiemployer welfare arrangement (MEWA), which have a high level of state and federal regulation. An association wishing to offer a plan will have to have a full understanding of the state regulations that will apply to their plan and pay close attention to the politics in those states. For instance, in late July, 12 attorneys general filed lawsuits to challenge the new regulations. In the same vein, New Jersey’s individual mandate will not accept many AHP plans as qualifying as minimum essential coverage. On the opposite side of the issue, Oklahoma has indicated its enthusiasm for AHPs. For AHPs that span multiple states, they will need to understand which state regulations apply to them. That answer will hinge on the specific plan design and the states it touches.
MEWAs are generally subjected to the same requirements as commercial insurance companies, and states can regulate reserve establishments, contribution levels, and more. Associations will need to become well versed in the applicable state and federal requirements and will have to comply with related federal regulatory filings, such as the M-1 filing relating to MEWAs and Form 5500. Associations with self-funded health plans will also have to wait for guidance from the Internal Revenue Service (IRS) on how ACA-related filing under sections 6055 and 6056 will be handled – and then be prepared to ensure participants receive the appropriate forms!
Associations will also have to wait and see if any insurance carriers choose to offer plans in the AHP space. The first opportunity to offer an AHP under the regulations is September 1, 2018, when any association meeting the commonality of interest and employer control tests can offer a fully insured AHP. The ability to offer a plan in the fall of 2018 will be completely dependent on willing carriers to enter into the market.
Associations can begin offering new self-funded plans under the new regulations on April 1, 2019. However, associations that do not have significant data regarding claims experience should be cautious about creating a new self-funded group, which could prove to be financially risky.
Associations will also need to have a full understanding of the AHP non-discrimination requirements, which will prohibit groups from restricting membership in the association based on a health factor. Health factors are health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability. For example, an association health plan could not exclude tobacco users from the plan.
Associations wishing to offer a health plan to its members should be working now to understand what the carriers in their state are planning on doing going forward. From there, they need to engage with their state insurance department to understand the regulations that will apply to them at a state level. Having experienced benefits counsel as part of the team will also be critical to ensure success meeting the numerous regulatory compliance burdens.
Danielle Capilla, J.D., ([email protected]) is director of compliance, employee benefits for Alera Group, a national employee benefits, property and casualty, risk management and wealth management firm.