Association Health Plan: Final Rule
Understanding Association Health Plans
On June 19, 2018, the Department of Labor released the final version of the new Association Health Plan (“AHP”) rule which intends to bring parity to the small and large group health insurance markets by giving smaller employers a greater ability to band together – primarily for the purpose of purchasing a single large group health plan.
Under this rule, AHPs enjoy many exceptions from some of the more onerous ACA restrictions on small group plans, such as community rating and, fulfilling a Trump administration promise, allows small groups to purchase coverage that does not have to cover the entire spectrum of Essential Health Benefits as dictated by the state the employer is located.
In one sense, AHPs are not new – business associations have been able to offer common health insurance benefits to their members for decades, but under the current rules, there are significant restrictions and, unfortunately, substantial opportunity for fraud on behalf of the association. This new rule addresses many of those issues to strengthen AHPs. This includes incorporating the HIPAA non-discrimination rules – preventing AHPs from using any sort of medical history to rate individuals or single employers within the association – and taking a strong stance that states still have the authority to set the rules with regards to the solvency of AHPs in their jurisdiction.
Effectively, that means that AHPs will likely end up being state-based programs, as each state’s rules on association plans vary, and there is no one standard that applies across the board. Additionally, states will likely require the plans to be fully-insured.
There are other important federal considerations as well. AHPs will be Multiple Employer Welfare Arrangements (“MEWAs”) which require a formal registration with the federal government, and annual reporting via the DOL’s form M-1, which is substantially more detailed than existing reporting for single employer plans. Additionally, associations preparing to offer AHPs for their members will have to carefully evaluate their options to address those requirements.
Governed properly, AHPs promise to be an interesting option for groups of small businesses going forward, but as with all regulations related to health care coming from Washington, you have to take the good with the bad.
In this case, we emphasize that the challenges with AHPs – state mandates and federal oversight – need to be thoroughly reviewed and addressed appropriately before the commitment is made to establish and sponsor an AHP.
Assurance will continue to evaluate AHP-related rules as they are fleshed out over the coming months. While the AHP rules themselves are finalized at this point, there are many loose ends – both the IRS and HHS will need to publish regulations to address certain issues that the AHP rule intentionally doesn’t address (ACA reporting under the employer mandate, for instance.)
Nonetheless, the AHP final rule is effective September 1, 2018 for new fully-insured AHPs, and April 1, 2019 for new self-funded AHPs.
If you have questions regarding AHPs or any other compliance-related matter, the ‘A’ Team is always here to help.
- Compliance Support Page
- ACA Playbook Overview
- What a Wild Ride It's Been
- Keep Calm and Don't Panic
- Buyer Beware: ACA Compliance Plans
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