ASSOCIATION HEALTH PLANS: An Opportunity, With Risks.

Author:Weiler, Ross D.

A new regulation for association health plans (AHPs) has the stated purpose of expanding access to more affordable, high-quality health insurance. This article explains the new rules and looks at their potential impact on insurance markets.

Association health plans (AHPs) are not new. In fact, associations have had the attention of policymakers as a potential yet risky way to way to address the problem of the uninsured and help small businesses cope with rising premiums since the 1980s.' AHPs are viewed by proponents as a way to expand coverage and reduce costs for individuals and small businesses. But some AHPs have been subject to fraud and abuse, resulting in significant changes over the years that strengthened how they are regulated at the federal and state level. With the new AHP regulation released this summer that once again significantly changes how AHPs are regulated, (2) we will now see firsthand whether the good outweighs the bad--or vice versa.

What Is an AHP?

An AHP is defined as "health insurance coverage offered to collections of individuals and/or employers through entities that may be called associations, trusts, multiple employer welfare arrangements (MEWAs), purchasing alliances or purchasing cooperatives." (3)

Where Have We Been

Prior to the Affordable Care Act (ACA), millions of individuals and small employers bought health insurance through associations. Many business and trade associations offered coverage as part of their broader mission to serve the economic or professional needs of their members; others existed exclusively to sell health insurance. Some served the best interests of their members; others did not.

Prior Federal Law Governing AHPs

Under federal law and regulations in force prior to the effective dates of the new AHP regulation, health insurance coverage offered or provided through an employer trade association, chamber of commerce or similar organization to individuals and small employers was generally regulated under the same standards that apply to insurance coverage sold by health insurance issuers directly to these individuals and small employers, unless the coverage sponsored by the association constituted a single Employee Retirement Income Security Act (ERISA)-covered "welfare benefit plan."

According to the Department of Labor (DOL), for a group or association to constitute a single welfare benefit plan, there must be a bona fide group or association of employers acting

Effective Dates

Fully insured AHPs were allowed to begin operating under the new regulation on September 1, 2018. Existing self-insured AHPs may begin operating under the new regulation on January 1, 2019 and new self-insured AHPs on April 1,2019. in the interest of its employer members to provide benefits for their employees. This is referred to as a commonality of interest.

DOL advisory opinions and court decisions have applied a facts-and-circumstances approach to determining whether there is a sufficient common economic or representational interest or genuine organizational relationship for there to be a bona fide employer group or association capable of sponsoring an ERISA plan on behalf of its employer members. To pass this test, the group or association must:

(1.) Be a bona fide organization with business/organizational purposes and functions unrelated to the provision of benefits

(2.) Include employers that share some commonality and genuine organizational relationship unrelated to the provision of benefits

(3.) Have employers that participate in a benefit program, either directly or indirectly, and exercise control over the program both in form and substance.

If an AHP could not meet these standards...

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