Association Health Plans (AHPs) are both group health plans and multiple employer welfare arrangements (MEWA). However, unlike typical plans offered by employers, this benefit is sponsored by a group association of employers. Recently, the Department of Labor (DOL) has provided new guidance and regulation regarding association health plans.
Association Health Plans, in General
As an employee welfare benefit plan subject to ERISA, AHPs have been held to the same standards and requirements as other ERISA-qualified plans. This includes provisions contained in ERISA amendments like the:
- Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”);
- Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”);
- The Patient Protection and Affordable Care Act of 2010 (“ACA”); and
- Other laws related to group health care plans.
Secretary of Labor Alexander Acosta recently said:
“President Trump is expanding affordable health coverage options for America’s small businesses and their employees. Many of our laws make healthcare coverage more expensive for small businesses than large companies. Association Health Plans are about more choice, more access, and more coverage.”
Under the old system, many employers – and workers – missed the opportunity to form or joint an association health plan.
New DOL Guidelines for Association Health Plans
The rule, which was published on June 21, 2018 (the “Final Rule”), allows more employer groups and associations to form association health plans. The changes specifically affect:
- Small Business. Owners can now join with other small business owners to get the same type of coverage offered by larger employers. Typically, this type of coverage is less expensive.
- Employer Groups and Associations. AHPs can be formed by companies that share common geography or that work in the same industry. In fact, coverage can be offered nationwide or in a specific state, city, county, or metro area.
- Working Owners. Sole proprietors and self-employed individuals and their families are now eligible for the quality healthcare covered offered by an AHP.
Consumers still enjoy protection against discrimination for pre-existing conditions.
AHPs already in existence were held to tougher geographic and common interest standards. These plans can continue operating as-is or choose to follow the DOL’s new guidelines. The Final Rule does not replace the DOL’s previously issued guidance under ERISA Section 3(5). Instead, it establishes an additional mechanism for groups or associations to meet the definition of an “employer” within the meaning of ERISA Section 3(5).
Thinking of Joining/Forming an Association Health Plan?
Consult with a benefits attorney before making any changes to or adding to your company’s benefit plans.