On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across State Lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American People.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

With the renewed focus on AHPs, we will be examining the history of AHPs and the effects of the changes proposed by the Trump Administration in this “Deep Dive” series. First in our series is a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations: Affinity Arrangements, Group Insurance Arrangements (“GIAs”), and AHPs.

Affinity Arrangements

  • A trade group or association (e.g., a local chamber of commerce) endorses a specific health plan.
  • The insurance carrier for the health plan pays a royalty to the trade group or association.
  • The insurance carrier issues standard fully-insured policies to members of the association who elect to purchase coverage through the health plan.
    • There may be a discount off the standard rate for the health plan offered to members purchasing coverage, to the extent permitted by state and federal community rating rules.
  • Each member that purchases the insurance policy has its own health plan that must independently comply with all associated legal requirements.
  • Each member that purchases the insurance policy files its own Form 5500, if applicable.
  • Because each member has its own health plan, the Affinity Arrangement is not subject to Multiple Employer Welfare Arrangement (“MEWA”) rules.

Group Insurance Arrangements (“GIA”)

  • A trade group or association establishes an independent trust, and a health insurance carrier issues a single group insurance policy to the trust.
  • Association members purchase insurance through the trust and receive a certificate of coverage.
  • Each such association member is treated as having its own plan under ERISA.
  • The GIA files a single Form 5500 (which satisfies the Form 5500 filing obligations of all member firms).
  • The GIA is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.

AHP

  • A trade group or association establishes an independent trust, and the health insurance carrier issues a single group insurance policy to the trust.
  • Association members purchase insurance through the trust and receive a certificate of coverage.
  • Unlike a GIA, the AHP is considered to be a single plan covering multiple employers.
  • The AHP files a single Form 5500 for the plan.
  • The AHP is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.