In 2018, the Department of Labor (DOL) released a final rule that gave small businesses more freedom to join together as a single group to purchase health insurance in the large group market or to self-insure. These benefit arrangements are called association health plans (AHPs). This Update is intended to alert employers that a federal judge has now ruled that key parts of the DOL’s final rule on AHPs are invalid. Under this 2019 ruling, small groups, individuals, and sole proprietors are not permitted to band together to gain the buying power of a large group for purposes of purchasing health insurance under the AHP rule. The 2019 court ruling now effectively puts a hold on development of AHPs in all states, even those states that were open to implementation of the AHP rule. These states may now need to unwind any prior AHP related approvals.
AHP Background
In 2017, President Donald Trump signed an executive order directing the DOL to consider issuing regulations that would permit more employers to form AHPs as a way to expand access to more affordable health coverage. The DOL was specifically instructed to consider expanding when an AHP may be treated as a single plan under the Employee Retirement Income Security Act (ERISA). Accordingly, the 2018 AHP rule was issued.
An AHP is a type of group health plan that is sponsored by a group or association of employers (instead of a single employer) to provide health coverage to employees of the AHP’s members. By forming AHPs, small employers can avoid certain Affordable Care Act (ACA) reforms that apply to the small group market. However, in exchange for lower premiums, AHPs may cover fewer benefits. Because AHPs are also regulated at the state level, the availability of these plans depends on each state’s regulatory approach.
For many employers, employees, and their families, AHPs promised to offer greater flexibility and more affordable benefits. But like many other workplace health plans, AHPs are subject to important state and federal consumer protection rules and requirements. To meet their responsibilities, plan sponsors and employers would need to understand some basic rules for managing and operating group health plans and other employee welfare benefit plans, particularly those set out in ERISA (which sets standards of conduct for those who manage group health plans and their assets). For more on AHPs, see the DOL Association Health Plans – ERISA Compliance Assistance publication directed at employers to help them understand their responsibilities under ERISA. The IRS also issued guidance on how the ACA’s employer shared responsibility rules would apply to AHPs.
DOL Response
The DOL’s Employee Benefits Security Administration (EBSA) disagrees with the 2019 court ruling on AHPs and is considering all available options in consultation with the Department of Justice including the possibility of appealing the decision and the possibility of requesting that the court stay its decision pending an appeal. At this time, the DOL has not reached a decision on how to proceed. In the meantime, the DOL has published Questions and Answers (Q&As) to address issues that may arise in relation to the court’s 2019 ruling. These Q&As will be updated as this matter evolves.
The 2019 AHP court ruling has effectively put a hold on development of AHPs in all states, even those states that were open to implementation of the AHP rule. Employers and business owners that have joined an AHP, or are considering doing so, should review how their plans may be affected by the 2019 court ruling. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.
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