{"id":7702,"date":"2024-01-18T11:21:32","date_gmt":"2024-01-18T16:21:32","guid":{"rendered":"https:\/\/chirblog.org\/?p=7702"},"modified":"2024-01-18T11:21:32","modified_gmt":"2024-01-18T16:21:32","slug":"proposed-rule-would-roll-back-expansion-of-association-health-plans","status":"publish","type":"post","link":"https:\/\/chirblog.org\/proposed-rule-would-roll-back-expansion-of-association-health-plans\/","title":{"rendered":"Proposed Rule Would Roll Back Expansion Of Association Health Plans"},"content":{"rendered":"\n
The U.S. Department of Labor (DOL) has released a proposed rule<\/a> that would rescind a Trump-era regulation designed to expand the formation and use of Association Health Plans (AHPs). DOL is also seeking comment on whether to formalize, through rulemaking, pre-existing criteria for the formation of a \u201cbona fide\u201d employee welfare benefit plan. Comments on this proposed rule are due 60 days after it is published in the federal register.<\/p>\n\n\n\n AHPs are governed by state and federal laws and have historically varied significantly<\/a> in size and membership. Some are formed to offer health insurance to individuals, others serve small or large employers, and still others serve a mix of individuals and employers. AHPs that offer benefits to employers generally qualify as multiple employer welfare arrangements (MEWA) under the Employee Retirement Income Security Act (ERISA). MEWAs, particularly those that are self-insured, have a long history of insolvency<\/a> and even fraud<\/a>.<\/p>\n\n\n\n Indeed, in the preamble to its proposed rule, DOL describes its \u201cextensive experience\u201d with unscrupulous promoters and operators of MEWAs. Compared to traditional health insurers, MEWAs have disproportionately suffered from financial mismanagement and abuse, leaving enrollees and providers with significant financial liabilities.<\/p>\n\n\n\n Under ERISA, an association can only sponsor an employee health benefit plan when it is acting as an employer. Such plans can only be offered through genuine employment-based arrangements. Longstanding DOL guidance prior to 2018 therefore allowed an association of employers to sponsor a single \u201cmultiple employer\u201d plan only if certain criteria are met. Once the criteria were met, the group would be considered a bona fide single employer group under federal law. On the other hand, if an AHP did not meet these criteria, federal regulators<\/a> would disregard the existence of the association in determining whether the coverage offered was considered individual, small-group, or large-group market coverage.<\/p>\n\n\n\n Under the Affordable Care Act (ACA), individual and small-group market insurers must meet federal standards<\/a> to which large-group market insurers are not subject. These standards include requirements to cover a set of essential health benefits<\/a> and participate in a single risk pool and risk adjustment programs, as well as limits on using health and age to set premiums. If an association could be considered a bona fide single employer group plan under ERISA, and the size of its membership qualified it as a large-group plan, it would be exempt from these ACA standards.<\/p>\n\n\n\n In 2018, the Trump administration sought to expand the number of AHPs that could qualify as single employer plans (and thus become exempt from ACA individual and small-group market standards). The 2018 federal rule loosened the criteria for the circumstances under which a group or association would be considered an \u201cemployer\u201d under ERISA. However, in 2019 the U.S. District Court for the District of Columbia in New York v. Department of Labor <\/em>set aside much of the 2018 rule and remanded it to DOL. Although the Trump administration appealed that ruling, the appellate court has stayed action in the case while the DOL reassessed its rulemaking.<\/p>\n\n\n\n Over four and a half years later, DOL is now seeking to rescind the 2018 regulation in its entirety.<\/p>\n\n\n\n Before publishing its 2018 regulations, DOL had, largely through sub-regulatory guidance, distinguished between bona fide single employer groups under ERISA and arrangements that would be considered state-regulated private health coverage subject to state and federal insurance rules. The Department had three criteria that had to be met for a group or association of employers to be considered a single employer group:<\/p>\n\n\n\n To determine whether an arrangement met these three criteria, DOL would examine, through a \u201cfacts and circumstances\u201d analysis, how the association solicited members, its eligibility criteria, the process and purposes behind the association\u2019s formation, the powers and rights of employer-members, who actually controlled the benefit program, and the extent of any employment-based nexus or genuine organizational relationship unrelated to the provision of benefits. DOL notes that its pre-2018 guidance on these issues, largely issued in the form of Department Advisory Opinions, has been universally upheld by the courts.<\/p>\n\n\n\n On June 19, 2018 DOL released a final regulation<\/a> loosening the criteria under which associations could obtain status as a single employer group. As noted above, such AHPs would be regulated under federal law as large-group coverage, making them exempt from ACA and other federal and state requirements that apply to the individual and small-group insurance markets.<\/p>\n\n\n\n The 2018 regulation diverged from longstanding DOL policies in three key areas.<\/p>\n\n\n\n DOL had long required that, to qualify as a single employer plan, the group or association must have a purpose other than providing health benefits. This was to help ensure that the AHP would actually act in the member-employer interests and to differentiate an employee health benefit program from a commercial insurance venture.<\/p>\n\n\n\n The 2018 rule loosened this standard to state that the group or association must have at least one business purpose unrelated to providing health benefits, but it did not need to be the primary business purpose of the group or association. The regulations thus allowed associations to form for the primary purpose of offering health benefits, so long as they had at least one other business purpose.<\/p>\n\n\n\n Prior to 2018, DOL required employer-members of an association to have a commonality of interest and organizational relationship beyond obtaining health benefits. The 2018 regulations relaxed this standard by allowing employer-members that are in geographic proximity to one another (which the rule defined as being within the same state or metropolitan area) to meet the commonality of interest standard. Such employers could be in unrelated trades, lines of business, or professions. However, the 2018 regulations did not address how geographic proximity alone would create a commonality of interest.<\/p>\n\n\n\n In general, ERISA applies only when there is an employer-employee nexus. DOL\u2019s longstanding interpretation of ERISA held that the employer-employee nexus is the \u201cheart\u201d of what makes an entity a bona fide group plan. Prior to 2018, working owners without common law employees were thus not considered employers, and could not be part of a bona fide single employer group. Similarly, such working owners could not be considered \u201cemployees\u201d able to participate in an ERISA-covered plan. The 2018 regulations represented a dramatic shift, allowing working owners without any employees to participate in AHPs, stating that such working owners could be considered an employer and employee at the same time.<\/p>\n\n\n\n In addition to the above three policy changes, the 2018 regulations also incorporated health nondiscrimination protections already applicable to group health plans under the Health Insurance Portability and Accountability Act (HIPAA) to AHPs. These include requirements that associations cannot discriminate in eligibility, benefits, or premiums against individuals employed by a member-employer based on a health factor.<\/p>\n\n\n\nBackground<\/h2>\n\n\n\n
Pre-2018 Policy On AHPs<\/h2>\n\n\n\n
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The 2018 AHP Regulation<\/h2>\n\n\n\n
The \u201cBusiness Purpose\u201d Standard<\/h3>\n\n\n\n
The \u201cCommonality Of Interest\u201d Standard<\/h3>\n\n\n\n
The Definition Of \u201cWorking Owners\u201d<\/h3>\n\n\n\n
Federal Court Decision On The 2018 Regulations<\/h2>\n\n\n\n