Last week, the Department of Labor (DOL) finalized new rules pertaining to association health plans (AHPs). The intent of the new rules are to make it easier for small businesses (including self-employed individuals) to join forces when purchasing health insurance coverage. AHPs would be regulated similarly to large group health plans which are exempt from some of the Affordable Care Act (ACA) market reforms,including the requirement to cover all ten essential health benefits. AHPs are expected to have lower premiums because of the relaxed rules, however, most of these plans will be subject to state law and applicable state mandated benefits.
Under previous rules, the DOL required a much greater commonality of interest for small businesses to band together and purchase coverage. Under the new rules, small businesses in the same industry or geographic location can buy into an AHP. For example, an AHP could be established for restaurant workers or real estate agents working anywhere in the country. Similarly, an AHP could be established and made available to small businesses who are located in the same state, city, county or metropolitan area.
AHPs would still be prohibited from denying coverage to a business or charging a higher premium based on the health status of its employees, but there would be some different ways premium could be charged. As an example, an AHP made available to the agriculture industry could charge employers different premiums based on their line of business, such as growing crops vs. raising livestock. Geography-based AHPs would also allow for premium discrepancies. As an example, an AHP available in a state could charge different premiums to construction companies and retailers. Many of the other premium establishment rules that apply to large group health plans will also be available for AHPs to use.
AHPs can be made available in the fully-insured market as early as September 1, 2018. AHPs that are already operating in the self-insured market can incorporate the new rules beginning on January 1, 2019, and new self-insured AHPs can begin operating on April 1, 2019. We are now in a bit of a waiting game to see the types of AHPs that will be made available, where they will be available and which insurance carriers will participate in this market.
While some people are applauding the new AHP rules, others are not. Some are referring to AHPs as junk insurance since these plans don’t have to cover essential health benefits. These people believe AHPs will still discriminate against people with pre-existing conditions even though health status cannot be used to determine eligibility. For example, an AHP could exclude coverage for diabetes and therefore discriminate against people with that condition. Massachusetts Attorney General Maura Healey and New York Attorney General Barbara Underwood have also issued a joint statement indicating their intent to file a lawsuit related to the new AHP rules. They believe the new rules are unlawful and skirt the requirements and consumer protections that are supposed to apply to small business plans under the ACA.