On January 4, 2018, the U.S. Department of Labor released the first draft of proposed regulations to allow the creation of Association Health Plans (AHPs). The proposed regulation stems from an executive order President Trump issued in October and is the administration’s next step in chipping away at Obamacare. The fundamental premise of the proposed rule would allow employers without common ownership or control to come together under an association for the purpose of purchasing health insurance.
Today, many business and employer trade associations – such as chambers of commerce or farm bureaus – are offering health insurance to their members. Their members could be self-employed individuals, small business employees, or even large business employees. According to Katie Keith with Health Affairs Blog, these associations often claimed ERISA redemption from state insurance regulation, identifying themselves as employers or employee organizations under ERISA.
The Trump Administration’s proposed rule would modify the definition of an employer under ERISA to allow employers to band together and form health plans based on their locations or industry. These associations sponsoring an Association Health Plan would be required to have a formal organizational structure with a governing body and bylaws, and the employer members would be expected to control its functions and activities.
The proposed rule specifically includes self-employed individuals, sole proprietors and small employers to be a part of the Association Health Plan provided they are within the same trade, industry, line of business or profession, or provided they have a principal place of business within a region that does not exceed the boundaries of the same state or the same metropolitan area. Additionally, the rules are designed to allow an employer with one owner/employee to fall within the group side of the health insurance market. Keep in mind, this provision is presently permissible in a number of states, including North Carolina.
Another highlight of the proposed rule includes prohibiting the association from excluding or restricting membership based on any health factor such as health status, medical condition, claims experience, receipt of healthcare, medical history, genetic information, evidence of insurability and disability. It also prohibits the association from charging an employer or individual employees or dependents within the plan a higher amount than another individuals are charged based on medical underwriting outcomes.
Association Health Plans would also not be required to include benefits across the ten broad “essential” categories of care, including hospitalization, prescription drugs and emergency care. While this matches the essential health benefit exception that large employers have under the ACA, it is unclear if the proposed rule would additionally allow Association Health Plans to be exempt from the ACA’s rules concerning meeting minimum value or to rely on state “standard” plan designs.
The implications and effects from Association Health Plans could be broad. We have seen from personal experience and past health care reform attempts that the theory that small employers can purchase health insurance cheaper together than on their own has not necessarily been proven. The impact this rule could have on the individual and small group markets could also be significant. The proposed rule is currently published on the Federal Register and will be available for public comment through March 6, 2018.