Association Health Plans: What Are They & What’s Changing?
What are Association Health Plans?
Association Health Plans allow small employers or self-employed individuals to group together to form a larger pool for offering health insurance. An Association Health Plan model can benefit these employers in two ways: 1) making the pool for insurance larger, which spreads the risk and lowers the costs of covering enrollees; and 2) allowing for greater bargaining power when negotiating rates with insurance companies for health insurance plans. Because Association Health Plans become self-insured plans, they are regulated by the Department of Labor (“DOL”) under the Employee Retirement Income Security Act (“ERISA”). ERISA-regulated plans do not need to comply with state-mandated insurance regulations regarding mandated benefits, which can also result in lower costs for employers when designing their health insurance plans. Additionally, if an Association Health Plan covers more than 50 enrollees, it would be considered a large group plan under the Affordable Care Act (“ACA”). Large group plans under the ACA can avoid covering essential services like mental health care and substance use disorder, which small group plans cannot avoid. Large group plans remain subject to some key ACA rules: they must cover preventive services and adult children up to age 26, and cannot exclude pre-existing conditions or impose annual or lifetime limits.
Some states have Association Health Plan-like concepts in place, but state regulations typically limit them to certain, related industries and only allow businesses in the same state to form these plans. For example, in Minnesota, Association Health Plans are an option for “agricultural cooperatives,” or businesses with employees who actively work in the production of agriculture in Minnesota. Small or solo practice agricultural business can band together to form an agriculture cooperative to offer a self-insured health plan to its employees and dependents, in hopes that a larger pool will decrease the costs of providing health insurance.
What did Trump’s executive order regarding Association Health Plans do?
On October 12, 2017, President Trump signed an executive order requiring the DOL to expand access to Association Health Plans nationwide. This order tasks the DOL with making the rules by which businesses can take advantage of Association Health Plan models with fewer restrictions. This will inevitably take regulatory power away from the states, who are currently responsible for monitoring fully-insured small group health plans, since Association Health Plans become self-insured plans regulated instead by the DOL under ERISA. The rules regarding state and federal health insurance regulation are extremely complex and interconnected. As a result, it may take the DOL a long time to develop specific rules regarding how to broaden access to Association Health Plans, including proposing rules for public comment, prior to instituting any changes.
What are next steps for employers interested in Association Health Plans?
Because Trump’s executive order did not immediately change the laws regarding Association Health Plans, it would be premature for employers to change any of their health care decisions based on this executive order. This order has not overturned, repealed, or replaced any part of the ACA and accompanying requirements for Association Health Plans. It will take time for the administration to work through the rulemaking process and determine how to implement Trump’s directives. Employers who may be interested in Association Health Plans should hold off on making any changes to their current health insurance benefits until specific guidelines about these plans come to fruition, and should continue to pursue the status quo for offering health insurance to employees for 2018.
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