This is the second article in our series on Association Health Plans (AHP). This week’s discussion focuses on the potential impact of the Department of Labor’s (DOL) decision to relax some AHP requirements.
The U.S. Department of Labor (DOL) recently expanded the ability of small groups and the self-employed to obtain health coverage through AHPs. A final rule published June 21 eases certain AHP requirements and restrictions.
The intent of the rule, according to DOL, is to provide greater flexibility enabling more small employers to band together to obtain health benefits and gain the economic power and regulatory advantages enjoyed by large employers. Since AHPs are typically insured in the large-group market, the coverage for AHP members, for example, would not be subject to the requirement to provide essential health benefits.
The potentially lighter regulatory burden on coverage through AHPs has historically been a subject of criticism from those who argue that all coverage provided to small groups should be subject to the same regulations. While the new rule’s impact of relaxing certain AHP requirements has further raised concerns about potential for abuse and fraud, DOL tried to address the concerns by including certain safeguards and referencing the applicability of others.
Under the rule, AHPs are subject to specific nondiscrimination requirements:
- Employer membership must not be conditioned on any health factor of any individual who is or may become eligible to participate in the group health plan sponsored by the group or association.
- The group health plan sponsored by the group or association must comply with s. 2590.702(b) of the federal code, prohibiting discrimination against participants and beneficiaries in benefits eligibility based on a health factor.
- The group health plan sponsored by the group or association must similarly comply with the rules of s. 2590.702 (c) with respect to nondiscrimination in premiums or contributions required for coverage under the plan.
- For purposes of the above requirements, the group or association may not treat the employees of different employer members of the group or association as distinct groups of similarly-situated individuals based on a health factor of one or more individuals.
The rule provides examples to clarify when an entity would meet the definition of bona fide group or association for the purpose of offering or entering into a group health benefit plan. The rule also clarifies that, while the AHP may segment its membership according to industry or geography and still meet its commonality of interest requirements, it may not define eligibility as a subterfuge for discriminating based on a health factor.
DOL points out existing regulatory protections that impact AHPs:
- The nondiscrimination provisions of the Health Insurance Portability and Accountability Act (HIPAA) apply to AHPs, preventing health discrimination in eligibility, benefits or premiums against individuals within a group of similarly situated individuals.
- Certain rules under the Employee Retirement Income Security Act (ERISA) give states the ability to regulate multiple employer welfare arrangements (MEWAs) and self-funded AHPs may also be affected by certain state requirements.
- ERISA requirements on all group health plans and employee welfare benefit plans would also apply to AHPs.
- State rate regulation on underlying insurance coverage would affect AHPs, and states are also enabled under ERISA to impose licensing and funding requirements.
- Other applicable requirements under the Affordable Care Act include large employer shared responsibility and minimum value coverage requirements, cost-sharing prohibitions on certain recommended preventive services, maximum out-of-pocket requirements and annual and lifetime dollar limits, as well as plan document and disclosure requirements.
DOL says the determination of whether the Mental Health Parity and Addiction Equity Act of 2008 applies under ERISA and the Public Health Service (PHS) Act depends on the size of the AHP. The size would be based, generally, on the number of employees employed by all members of the bona fide group or association.
The continuation coverage requirements in COBRA are another regulatory consideration applicable to AHPs. DOL said it will consult with the Department of Treasury and the Internal Revenue Service and will likely issue guidance in the future.
Husch Blackwell attorneys have already been advising employers, associations, health insurance brokers/consultants, and insurance companies with respect to the new rule. In particular, we have been analyzing association governance structure, health plan documentation required under ERISA, nondiscrimination issues, insurance policies and existing association structures to determine whether it is advantageous to be subject to the old or new rules.