The Employee Benefits Security Administration (EBSA) today posted draft regulations that could let a trade group offer a nationwide association health (AHP) plan for its member employers.
Under the draft regulations, a general business group in a multi-state metropolitan area could offer an AHP for all of its member employers, regardless of what industry the employers were in, as long as the employers were in the group’s metropolitan area.
Today, a business group that wants to sponsor an AHP must have some other “bona fide purpose.”
Under the draft regulations, an AHP would not have to have any purpose other than to provide health benefits. Organizers could set up a new AHP simply to obtain health coverage.
EBSA, an arm of the U.S. Department of Labor (DOL), developed the draft regulations in response to an executive order President Donald Trump signed in October.
The order calls for federal agencies to try to ease employer access to AHPs.
The order also calls for federal agencies to ease individuals’ constraints on access to short-term health insurance, and to ease any constraints on employers’ use of health reimbursement arrangements.
The new draft regulations packet, which takes up 83 PDF file pages, is set to appear in the Federal Register on Friday. The Federal Register is a publication the federal government uses to distribute official regulatory documents, ask for comments on draft regulations, and put completed regulations into effect.
EBSA lists Elizabeth Schumacher, an official in the EBSA Office of Health Plan Standards and Compliance Assistance, and Janet Song, an official in the Office of Regulations and Interpretations, as the regulation project contact people.
Jeanne Klinefelter Wilson, the DOL deputy assistant secretary who’s been managing EBSA, signed the draft packet.
Comments on the new draft regulations will be due 60 days after the official publication date.
A copy of the packet is available here.
Here’s a look at seven highlights from the packet.
1. Association health plans already exist.
Federal regulators already let employers form single-state AHPs.
The Small Business Health Options Program (SHOP), part of the Affordable Care Act public health insurance exchange system, gives SHOP members the ability to buy health coverage through a program that could function as a kind of government-run, multi-industry AHP for small employers.
As of January 2017, however, SHOP plans were serving just 27,205 small employers and covering just 233,000 employees and dependents, EBSA officials write in the introduction to the proposed regulations.
(Photo: Mike Scarcella/ALM)
Multiple employer welfare arrangements, or MEWAs, cover about 1.8 million people, officials estimate.
EBSA officials note, however, that one problem they ran into when they were developing and analyzing the new draft regulations is a lack of data on the existing multi-employer health plan purchasing programs.
Officials say the draft regulations would have no direct effect on existing types of multi-employer coverage purchasing arrangements, and that the new AHPs could use MEWAs, voluntary employees’ beneficiary association charters and similar vehicles to provide coverage.
2. EBSA officials talk about why they are easing access to AHPs, and why they have mixed feelings about the project.
EBSA drafted the new proposal because some employers believe AHPs would help them cut benefits costs, officials write.
AHP supporters believe stronger AHPs could “purchase coverage that would be less expensive, because it would not be subject to some of the regulatory requirements applicable to the small-group market but not the large-group market,” officials write. “Proponents also contend that AHPs can help reduce the cost of health coverage because of increased bargaining power, economies of scale, administrative efficiencies, and transfer of plan maintenance responsibilities from participating employers to the AHP sponsor.”
For would-be AHP organizers, one problem has been that the Centers for Medicare and Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services, has rarely treated the association as the true AHP coverage sponsor, EBSA officials write.
Instead, officials write, CMS officials have “looked through” the association to see what kind of employer was sponsoring a particular individual’s coverage. If an AHP member employer is a small business, for example, CMS applies small-group rules to the coverage, not large-group or association rules, officials say.
Officials note several times, however, that they want to find ways to keep state insurance regulators and other entities involved in keeping AHPs from suffering the same kinds of problems that have traditionally plagued MEWAs.
“Some MEWAs have historically been unable to pay claims due to fraud, insufficient funding, or inadequate reserves,” officials say.
Officials also emphasize their concern about the possibility that AHPs could try to discriminate against workers, dependents or employers based on individual health plan enrollees’ health status.
3. EBSA says it can ease AHP formation without changes in existing laws or regulations by changing “sub-regulatory guidance.”
EBSA officials say that many of the rules that now govern AHPs were established in advisory opinions or other batches of “sub-regulatory” guidance.
EBSA believes the DOL can change the interpretations given in the sub-regulatory guidance by establishing new regulations, officials say.
Officials note that EBSA has developed the new draft together with officials from CMS and from the Internal Revenue Service.
4. EBSA would ease association health plan formation mainly by changing the definition of “employer” for AHP purposes, and it would try to keep AHPs from using that change to discriminate against high-risk people, or against employers with high-risk plan enrollees.
Under the current federal AHP regulations, the employers in an AHP must meet a “commonality” standard, meaning that they have something in common other than wanting to provide health coverage.
Individual employers can offer different benefits packages and premium structures for different classes of workers, but employers cannot use the worker classes to discriminate against people based on their health status, officials say.
An AHP that applies risk rating to member employers is acting like a commercial insurer, and that conflicts with the rules Congress has set, officials say.
Under the proposed regulations, an AHP could not treat member employers as “distinct groups of similarly-situated individuals” and set different rates for different distinct groups.
EBSA is also requiring that the member employers control an AHP, to reduce the likelihood that an AHP will act like a commercial insurer and increase the odds that the AHP will act in the interest of the participating employers.
5. EBSA would give some general-purpose AHPs a limited ability to sell coverage across state lines.
Under the draft regulations, a chamber of commerce or similar group in a multi-state metropolitan area, such as the Kansas City area or the New York City area, could offer AHP coverage to member employers throughout the metropolitan area.
6. EBSA might try to exempt self-insured MEWAs from state benefits mandates.
EBSA officials say they are working on more regulations, and that the future proposals could involve DOL’s authority to exempt self-insured MEWAs from state regulation.
“The proposed rules would not alter existing … statutory provisions governing MEWAs,” officials say. “The proposed rules also would not modify the states’ authority to regulate health insurance issuers or the insurance policies they sell to AHPs.”
A state could still regulate a self-insured MEWA’s solvency, officials say.
7. Comments on the draft regulations will be due 60 days after the official Federal Register publication date.
EBSA officials are asking for comments on all aspects of the proposed regulations, and any alternative approaches that would fit with the existing laws and regulations.
The draft also asks for comments on how the proposal might interact with other state and federal laws and regulations, such as Internal Revenue Section 501(c)(9).
Section 501(c)(9) governs voluntary employees’ beneficiary associations (VEBAs), and some AHPs might want to use VEBAs, officials say.
“Comments are also solicited on the impact of these proposals on the risk pools of the individual and small group health insurance markets, and for data, studies or other information that would help estimate the benefits, costs, and transfers of the rule,” officials say.
—Read Johnson Brings Back Association Health Plan Bill on ThinkAdvisor.