President Donald Trump’s new association health plans (AHPs) may enjoy much of the flexibility that large U.S. employer-sponsored health plans now get, but they may face some of the extra mandates that large health plans face.
U.S. Department of Labor officials talked about what the new AHPs will and won’t be able to do today, when they posted the final AHP framework regulations on the website of the department’s Employee Benefits Security Administration division.
EBSA oversees DOL regulations and programs that affect employee benefits.
DOL officials say the AHP program will give small employers access to the kind of coverage that large employers with self-insured plans can now offer.
“Many of our laws, particularly Obamacare, make health care coverage more expensive for small businesses than large companies,” U.S. Secretary of Labor Alexander Acosta said in a statement about the completion of the AHP regulations. “AHPs are about more choice, more access, and more coverage.”
More information about the new regulations, including a summary sheet and a full copy of the final rule, are available here.
What AHPs Can and Can’t Do
Officials say an AHP can either be self-insured, with or without help from stop-loss insurance, or buy insurance from a health insurer.
In the sections on AHP membership, officials say the new AHPs:
- Can offer coverage to some or all of the employers in a designated trade or industry group nationwide. (It’s not stated whether an AHP can offer coverage to employers in a single industry, multi-state area that leaves out some U.S. states.)
- Can offer coverage to some or all of the employers in a state, city, county or multi-state metropolitan area, such as the Kansas City metropolitan area, or in a combined statistical area that includes both a metropolitan area and a smaller “micropolitan area.” (The regulation does not say whether an AHP can offer coverage to all of the employers in a micropolitan area, or in an area that’s smaller than a city or county, such as all of the employers in a particular office park.)
- Cannot offer coverage to employers in a two-state region simply because the states are next to each other.
- Can offer coverage to self-employed people who have no employees.
In the sections on AHP benefits, officials say the new AHPs:
- Can offer benefits outside the Affordable Care Act essential health benefits framework.
- Must pay for any EHBs they do cover without imposing annual or lifetime dollar limits.
- Must comply with any benefits rules, including ACA preventive care benefits rules, that apply to large employer plans.
- Must comply with the same Mental Health Parity and Addiction Equity Act (MHPAEA) standards for behavioral health benefits that apply to large employer plans.
- Can ignore the ACA employer coverage “minimum value” rules, while recognizing that the employer members will still have to comply with the minimum value rules themselves.
In the sections on AHP underwriting standards, officials say the new AHPs:
- Can underwrite employers based on factors such as an employer’s size, location or industry.
- Can offer the same kinds of wellness program participation incentives that an ordinary employer-sponsored health plan can offer.
- Cannot sell or price coverage based on an employer’s health claim experience, or use the rating criteria that are allowed to shut out a specific high-cost plan participant.
- Cannot consider an individual employee’s health status when setting rates for that employee, or when deciding whether to cover that employee.
One major reason for the push for access to AHPs is some employers’ hunger for freedom from state health benefits mandates, and from the Affordable Care Act rules that apply to individual coverage and coverage for small employer groups.
Traditionally, large employers have been able to use provisions in the Employee Retirement Income Security Act of 1974 (ERISA) to escape from some state-specific health insurance rules, including some benefits mandates.
DOL officials hint in the introduction to the new regulations that they could take action against a state if they believe a state impose rules that are unfair to AHPs.
ERISA Section 514(b)(6) “provides a potential future mechanism for preempting state insurance laws that go too far in regulating non-fully-insured AHPs in ways that interfere with the important policy goals advanced by this final rule,” officials say.
But officials go on to say about preemption of state insurance laws that “doing so at this time lies outside the scope of this proceeding.”
Officials say, multiple times, that they respect states’ authority to regulate health insurers’ solvency, and that they expect to work closely with state regulators on AHP oversight.
“The final rule importantly depends on state insurance regulators for oversight and enforcement to, among other things, prevent fraud, abuse, incompetence and mismanagement, and avoid unpaid health claims,” officials say.
DOL officials note that some commenters asked them to set limits on compensation for AHP fiduciaries and brokers.
“The department declines this suggestion, and notes that the fiduciary responsibility provisions in Part 4 of ERISA already establish rules and requirements for service provider compensation and other expenses of administering a plan, including a requirement that service providers receive no more than reasonable compensation for their services,” officials say.
Officials set the following effective dates for the new AHP framework regulations:
Sept. 1, 2018: New, fully insured arrangements.
Jan. 1, 2019: Existing self-insured MEWAs that want to comply with the new regulations.
April 1, 2019: New, self-insured AHPs.
Past Stability Problems
State and federal governments have developed many association health plan programs for individuals and employers over the decades, and many have failed.
In recent years, for example, the Affordable Care Act Consumer Operated and Oriented Program provided startup loans for a new class of nonprofit, member-owned health insurers. Most have failed.
Many single-state MEWAs formed outside the ACA framework have also failed, either because of problems with fraud or because of problems with keeping lower-risk members from switching to cheaper options.
The ACA public exchange system itself is based on health insurance purchasing cooperative proposals and programs that came to life in the 1980s and 1990s. Some early outlines for the legislation that created the ACA called the state-based exchange programs health insurance purchasing cooperatives.
Traditionally, broker and employer groups have backed association plan proposals, in the hope of giving clients and members more benefits options.
Insurer groups have often opposed the proposals, possibly because of concerns about plan and market stability, and possibly because of concerns about increased competition for the existing plans.
In the past year, that trend has continued.
Broker and employer groups have supported the Trump administration AHP proposal.
The American Academy of Actuaries, individual health plans, and health insurer trade groups have all expressed skepticism about how stable the Trump administration’s AHPs might be, and how they might affect the stability of traditional employer plans.
DOL officials say in the introduction to the new regulations that they hope the “commonality of interest” provisions in their regulations will help stabilize the new AHPs.
Those provisions require an AHP to have a formal organizational structure controlled by the employer members, not by a health insurer.
“Commenters suggested that the existence of formalized and robust organizational structures could be an important form of protection against fraud and insolvency,” officials say.
State regulation can also help stabilize the new AHPs, officials say.
America’s Health Insurance Plans, a major health insurer group, put out a statement emphasizing that it still has concerns about how the new AHP program might work.
“The final rule provides some important protections by ensuring consumers, including those with pre-existing conditions, do not face discrimination as new association plans are created, and by preserving state authority to regulate AHPs offered in their markets,” AHIP says in the statement. “However, we remain concerned that broadly expanding the use of AHPs may lead to higher premiums for consumers who depend on the individual or small group market for their coverage. Ultimately, the rule could result in fewer insured Americans and may put consumers at greater risk of fraudulent actors entering this market.”
— Read View: Let the DOL Oversee Association Health Plans? No Way, on ThinkAdvisor.