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Association Health Plans
The U.S. Department of Labor recently implemented a new Final Rule expanding potential participation in Association Health Plans (AHPs). Essentially, the rule expands the definition of an employer.
As a result, we are likely looking at a significant expansion of self-funded AHPs in the near future. Here’s what insurance brokers need to know about the past, present, and future of AHPs.
How AHPs work
The core idea behind AHPs is that small employers should be able to join together to offer a large-group health plan as though they were a single employer. Many self-employed people can also join AHPs through professional associations.
It should be noted that the AHP term encompasses a wide umbrella of potential health plans, including professional or trade associations offering health insurance, associations established by PEOs (Professional Employee Organizations), and Multiple Employer Welfare Arrangements (MEWAs).
AHPs have been around for a long time. However, they’ve historically been regulated less stringently than other health insurance plans, and were specifically exempted from ERISA. Amendments to ERISA later clarified that state governments could regulate AHPs.
The Affordable Care Act (ACA) increased regulations for AHPs. Under the ACA, the Department of Labor (DOL) has more authority to regulate AHPs. Some AHPs—though by no means all—dissolved following enactment of the ACA.
The Final Rule’s impact on AHPs
Now, we are once again looking at regulatory changes that will impact AHPs. The Final Rule will broaden the potential pool of AHP buyer by implementing the following changes:
- The definition of an employer is expanded to include sole proprietors, referred to as “working owners.”
Small business owners and employees and working owners can join self-funded AHPs and other AHPs.
- The rules governing who can form an AHP are now broader. Regulations state that employers may form associations if there is a “commonality of interest.” Now, the commonality of interest call can include geographical location, regardless of industry. National associations may also form on the basis of industry, trade, or profession (i.e. all dental assistants).
- Associations can be created for the primary purpose of offering health insurance. However, they must not be the only purpose. (Previously, health insurance could only be a secondary purpose of forming an association.)
There are some things that haven’t changed. Existing nondiscrimination laws (including discrimination based on health status) are still applicable to AHPs. DOL and state governments continue to have regulatory power over AHPs. The Final Rule doesn’t supplant existing regulations, but rather clarifies them.
Ultimately, what this means is that the ground is ripe for new AHPs to form and for existing AHPs to expand.
Weighing the benefits and challenges of AHPs
The expansion of AHPs will offer many benefits to businesses and consumers:
- Small businesses should be able to obtain health insurance for their employees (and owners) at a lower cost. Oftentimes, coverage will be more substantial than what small businesses can afford on their own.
- Associations will have more flexibility in terms of which health plans they can offer. For companies with younger workforces, for example, it might make sense to lower costs by purchasing a more basic health plan.
To be sure, there are still some uncertainties in the future of AHPs. It’s possible that the Final Rule will face legal challenges and more State regulations..
Even so, it seems that AHPs are here to stay, and that presents a significant opportunity for our broker clients.
If you’d like to learn more about this opportunity, contact RMTS for a quote. We have extensive experience in the association marketplace and more than thirty years of experience in providing customized rates to offer our customers the coverage they need.