Proposed Association Health Plans: Not a Dream of Deregulation

On January 5, 2018, the Department of Labor published a proposed rule on Association Health Plans (AHPs). The rule proposed several changes to current DOL guidance that would make it easier for health plans to be created by diverse combinations of employers. Most significantly, the proposed rule:

  1. Allows related employers to come together to form an AHP, even across state lines. For example, a national association of a specific employer type could form an AHP.
  2. Allows unrelated employers to come together to form an AHP as long as they are in the same state or metropolitan area. For example, a Chamber of Commerce could form an AHP.
  3. Allow self-employed individuals with no employees to participate in an AHP. For example, ride-hailing drivers could form an AHP.

While the rule would clearly make it easier for AHPs to be created in different circumstances, both proponents and detractors of the regulation may be overemphasizing how the AHPs, as proposed, could avoid state and federal regulations and generate cheap, “skinny” plans lacking in substantial health benefits. For detractors, AHPs do not escape many of the benefit and consumer protections required by plans by the Affordable Care Act (ACA). For proponents, AHPs may not be the “hoped for” ideal of de-regulation and flexibility.

The proposed rule addresses; at a high level, where these AHP plans would fall in terms of applicable state laws, the ERISA pre-emption and ACA provisions. The important take away is that the proposed rule did not change any of the underlying provisions in ERISA, ACA or state laws that apply to group health plans or the small group and individual health insurance markets. The rule merely changed DOL guidance on the types of employers that could come together to create an association health plan.

Here are some examples of the government rules that would apply to AHPs, as proposed:

Self-insured AHPs

  • While a self-insured AHP would not have to comply with state benefit mandates, they would still fall under state-specific multiple employer welfare arrangement (MEWA) laws. This means that a self-insured AHP that has members in multiple states would be required to comply with the MEWA laws in each state, and there is wide diversity in how each state treats self-insured MEWAs.
  • Self-insured AHPs would still be under ERISA and some ACA rules if they had 50 participants or more, including the mandate that they had to offer benefits with minimum value.

Fully-insured AHPs

  • Fully insured AHPs would still fall under state insurer laws. A state could make fully-insured AHP comply with benefit mandates, and there’s a suggestion that a state could make an AHP comply with its small group plan rules.

Consumer Protections

  • The proposed rule reinforces ACA provisions that would prohibit discrimination based on pre-existing conditions. An AHP cannot:
    • refuse employers based on the health status of its employee(s)
    • charge one employer higher premiums based on the health status of its employee(s)
    • create eligibility benefits based on health status of an employer’s employee(s)
  • Other ACA requirements for group health plans still apply, including coverage for children up to age 26 and free preventative services.

The existing underlying mandates are not changed by the proposed rule; however, as the rule itself points out, the proposed changes would at least make it easier for AHPs to manage the current laws that apply to them: “AHPs currently face a complex and costly compliance environment that may simultaneously subject the AHP to large group, small group, and individual market regulation…”As proposed, the rule would allow a AHP to fit somewhat neatly into one of two specific categories of statutes and regulations: those that apply to fully-insured group plans or those that apply to self-insured group plans.

The table below compares AHPs with other health plan categories in terms of some of the existing mandates that AHPs would fall under, given the information in the proposed rule.

The deadline for submitting comments on the AHP proposed rule is March 6, 2018.