The Department of Labor (DOL) received over 900 comments after issuing a proposed rule in January aiming to promote the growth of Association Health Plans (AHPs). The proposals would relax current standards for small employers and self-employed individuals to join together and act as a large employer for the purpose of purchasing health insurance. By forming a single large group, these arrangements would qualify as large group coverage and be exempt from many rules set forth by the Affordable Care Act (ACA), such as essential health benefits (EHB) and rating restrictions. For a more detailed overview of the proposed rule, you can download our issue brief here.
To understand the potential impact of the proposed rule, CHIR reviewed a sample of comments from state officials, consumer groups, insurers, and business representatives. The first blog in this series summarized reactions from eighteen state attorneys general, the second blog highlighted concerns from nine consumer and patient advocacy organizations, and the third blog examined comments from ten of the largest health insurers and associations. For the fourth blog in our series, we focus on comments from a sample of business industry groups:
National Association of Realtors (NAR)
Pennsylvania Association of Realtors
MetroTex Association of Realtors
National Federation of Independent Business (NFIB)
Independent Insurance Agents & Brokers of America, Inc.
Pittsburgh Airport Area Chamber of Commerce
Capitol Hill Chamber of Commerce (Seattle, WA)
Uber Technologies, Inc. (Uber)
The majority of business groups supported the proposed rule, but not without recommended modifications. The only business group in our sample that strongly opposed the proposed rule was the Small Business Majority, citing many of the same concerns as consumer advocates and state attorneys general regarding the potential consequences to risk pools and the lack of consumer protections.
Expanding the definition of employer and eligible members
Under the proposed rule, “sole proprietors” or “working owners” would be eligible to join an AHP after meeting certain requirements, such as a threshold number of hours worked or minimum income earned in a given industry. In general, business groups supported this expanded definition, with some exceptions. Uber and the NAR took issue with the “hours worked” eligibility requirement under the proposed rule, which stipulates that an individual must work 120 hours per month to qualify as a working owner. They argued that independent contractors such as driver-partners and realtors do not have predictable or traditional work schedules, and thus might not be able to fulfill this requirement.
A number of business groups also urged the DOL to eliminate the proposed condition that members of an AHP give up coverage if they have access to a subsidized employer group health plan through a spouse. Most commonly, the business groups that opposed this provision noted that the AHP member may have better coverage than their spouse, in which case they should be able to keep their preferred plan. Additionally, the U.S. Chamber of Commerce asked that the definition of a spouse’s “group health plan” that disqualifies a working owner from coverage be clarified to exclude plans consisting only of HIPAA excepted benefit coverage.
Relaxing requirements for AHP formation
The proposed rule would allow employers to create associations for the sole purpose of providing health insurance coverage through two “commonality of interest” tests: (1) being within the same trade, profession, or industry or (2) having a principle place of business in the same geographic region. Most commentators supported the proposed changes; some recommended further loosening restrictions on AHP formation. The NFIB, for example, took issue with the phrase “bona fide” in regards to eligible employer groups, arguing that the phrase adds unnecessary ambiguity to what exactly qualifies as a group or association of employers. Further, the NFIB suggested that the size of an employer group should qualify as a commonality of interest, stating that small businesses without a shared industry or geographic location should still be able to form an association. The MEWA Association of America urged the DOL to lower the commonality of interest threshold to allow AHPs that do not have commonality of interest to operate nationwide. Stride Health, an online broker that targets workers in the gig economy, expressed concern that the proposed rule’s description of commonality of interest regarding similar trades or professions hinders gig workers with multiple income streams from participating.
Conversely, some commentators thought the DOL’s loosening of the commonality of interest test went too far. For example, the U.S. Chamber of Commerce and two local chambers urged the DOL to tighten this provision by only applying it to associations already in existence that formed for purposes other than providing health insurance benefits. Alternatively, the U.S. Chamber urges that if the DOL is committed to permitting new AHPs to form under this rule, that they delay the effective date so that “analysis” can be done to see if additional “guard rails may be helpful.”
Multiple business groups, including the NFIB, the U.S. Chamber of Commerce, the MEWA Association of America, and Uber had recommendations regarding the governance of AHPs in the proposed rule. The NFIB requested that the final rule use the phrase “governing authority” rather than “governing body” to clarify that an association can be run by a single decision maker rather than, for example, a board of governors. The local Pittsburgh chamber of commerce emphasized the importance of the final rule having significant organizational reporting requirements to protect against “disingenuous organizations.” The local Seattle chamber went further, and argued that AHPs should only be permitted to form under pre-existing associations that have been in operation for at least five years. The MEWA Association of America and Uber raised concerns that the proposed rule did not go far enough in its definition of acceptable membership control over an AHP. In particular, Uber pointed to the uncertainty regarding whether assistance in administering or establishing a health plan on behalf of association members could be used as evidence that members are employees rather than independent contractors, which could have tax implications that are against the business interests of Uber.
State oversight authority
Business groups were mixed in their views about state regulation of AHPs. The Independent Insurance Agents & Brokers of America and Small Business Majority, for example, argued for maintaining state authority to regulate AHPs. On the other hand, the MEWA Association and the NAR asked that the final rule include language that would protect self-insured AHPs from state requirements that could conflict with federal rules, such as re-categorizing large group AHPs as small group health plans and requiring them to comply with federal and state small-group insurance rules. The NFIB went further and suggested that the DOL ask President Trump to consider legislation that “would more fully if not completely preempt state laws and regulations affecting AHPs.”
Nondiscrimination provisions
The commentators also had mixed views on the proposed rule’s nondiscrimination protections. The local Pittsburgh chamber approved of the proposal to prohibit health status discrimination in issuance, rating, and benefit design. Conversely, the NAR and MEWA Association of America advocated that AHPs should be allowed to use a small group’s claims experience to differentiate premiums for distinct employer groups within an association, with the MEWA Association noting that such underwriting is needed to protect solvency. The U.S. Chamber of Commerce proposed a somewhat different approach for addressing risk among employer groups within an AHP, suggesting that the AHP be permitted to adjust rates for similarly situated employees across the member companies, so long as adjustments are made based on bona fide employment factors, such as full-time vs. part time status. The Chamber also argued that existing AHPs be “grandfathered” so that they can continue to use underwriting to differentiate premium rates among member employers.
A Note on our Methodology
This blog is intended to provide a summary of some of the comments submitted by a specific stakeholder group: organizations or associations representing business interests. This is not intended to be a comprehensive report of all comments from all business interests on every proposal in the AHP rule. For more stakeholder comments, visit http://www.dol.gov.
Disclaimer: CHIR is part of a coalition that has submitted a Freedom of Information Act request asking DOL to release critical data and analysis that would support the agency’s capacity to adequately implement its proposed policies and protect consumers.