Association Health Plans Could Mean More Affordable Benefits for Small Businesses

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Association Health Plans are a hot topic in 2018. More affordable benefits for small businesses could be just around the corner. In this post, Sue Eaton, compliance officer at Gravie, discusses the proposed regulations for Association Health Plans and what we can expect next. 

On January 4, 2018, the Department of Labor released proposed regulations entitled “Definition of ‘Employer’ Under Section 3(5) of ERISA – Association Health Plans.”  The stated goal of the regulation is to expand access to affordable health coverage, especially among small employers and self-employed individuals, by removing undue restrictions on the establishment and maintenance of association health plans under ERISA.”

To accomplish this goal, the regulation would provide additional instances where employers could join together in an employer group or association for the purpose of purchasing group health coverage.  The additional flexibility would allow small employers to take advantage of certain benefits of large employer groups including a more substantial pool of individuals across which administrative costs and risk can be spread.

A very brief summary of the rule’s provisions:

  • Employers Could Band Together for the Single Purpose of Obtaining Health Coverage. The regulation would modify the definition of “employer,” in part, by creating a more flexible “commonality of interest” test for the employer members. This would allow any size employer, including a working owner, to join a AHP if they either:  1) are in the same trade, industry, line of business or profession (regardless of geographic location); or 2) have a principal place of business in the same state or metropolitan area (even if the metropolitan area includes more than one state).
  • The Group or Association Must Have an Organizational Structure and Be Functionally Controlled by Its Employer Members. The proposal would require that the AHP have formal organizational structure with a governing body and have by-laws or similar documentation. It also requires that the member employers control its functions and activities.
  • The Group or Association Plan Coverage Must be Limited to Employees or Employer Members and Treatment of Working Owners. Participation in the group health plan sponsored by the association would be limited to employees and former employees of the employer (and family or beneficiaries of those employees). This is intended to ensure a bona fide employment based association
  • Health Nondiscrimination Protections. The nondiscrimination provision in these rules builds on existing health nondiscrimination provisions applicable to group health plans under HIPAA which govern eligibility for benefits and premiums for group health plan coverage. Membership in the association may not be based on any health factor. The association is also prevented from employer by employer risk rating.

The Department of Labor has requested comments from the public on a number of specific issues identified in the proposed regulations. Those comments are due on or before March 6, 2018.

As always, we will keep you up-to-date on the status of the proposed regulations. 

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Note: Gravie does not provide legal nor tax advice. This blog post is provided for educational and informational purposes only. You should not act on any information provided without consulting legal counsel.