May 08, 2024
Association Health Plans 2018 Ruling Rescinded
Back in 2018, agency rules provided a path for small employers and working owners to form association health plans (AHPs) that could offer a large group health plan to members who otherwise would have been required to offer small group market coverage.
The 2018 rule expanded the definition of association health plan in a way that would have allowed some individual and small group health insurance coverage to be treated as large group coverage and evade critical consumer protections under the Affordable Care Act, which requires coverage of essential health benefits such as emergency and maternity and newborn care. Specifically, the 2018 rule established an alternative set of criteria for determining when a group or association of employers is acting “indirectly in the interest of an employer” under section 3(5) of the Employee Retirement Income Security Act for purposes of establishing an association health plan as a multiple employer group health plan, allowing the AHP to evade ACA consumer protections.
In addition, it allowed the AHP to be treated as a single plan for ERISA purposes rather than treating each participating employer as a separate ERISA plan sponsor. A court decision in 2019 invalidated portions of the final rule, removing the expanded AHP option. In an effort to clarify things, the agencies provided regulations that formally rescind the 2018 AHP rules and confirm that in most cases, when “unrelated” entities offer shared benefits via a multiple employer welfare arrangement (MEWA), the coverage available for a participating member will be based on that particular member’s size, and each participating member will be seen as sponsoring their own separate group benefit plan(s).
For the vast majority of employers, these rules will not have any impact, and employers participating in established, industry based AHPs should be okay under the pre-2018 rules.
The formal repeal of the 2018 AHP rules just reinforces that it is generally difficult for unrelated employers to band together to offer coverage to their employees.
Resources
The DOL’s Announcement, dated April 29, 2024, outlines the Background, the 2018 AHP Rule and the Decision to Rescind the 2018 AHP Rule.
DOL Fact Sheet – Rescinds Invalidated Rule on Association Health Plans
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