H&W: Association Health Plans: Final Rule Recap

On June 21, 2018, the Department of Labor published its final rule addressing ERISA’s Association Health Plan (“AHP”) regulations.  The final rule does not supplant previously issued guidance regarding AHPs.  AHPs that meet the requirements for single employer status under the existing guidance will continue to be considered single employers.  In addition, new employer groups or associations that conform to the Department’s pre-rule guidance can sponsor a single-employer AHP.  The final rule also expands the types of multiple-employer arrangements that will be deemed to be a single employer for purposes of ERISA.   A summary of essentials for AHPs organized under the final rule is below.  The final rule:

• Requires at least one “substantial business purpose” exist within the AHP (unrelated to the provision of benefits) to sponsor an ERISA-covered group health plan.
• Outlines what will meet elements of the “control test.” Employer members:
  • may regularly nominate, elect and remove (with or without cause) any directors, officers, trustees or other similar persons; and
  • that participate in the plan have the authority and opportunity to approve or veto decisions or activities which relate to the formation, design, amendment, and termination of the plan.
• Expands participant eligibility to “working owners.” A working owner without common law employees participating in an AHP is considered both an employer and an employee, allowing him to obtain group health coverage through the AHP.
• Restricts health insurance issuers, networks, HMO and similarly interested parties (and their subsidiaries) from sponsoring or controlling an AHP (e.g., by having company representatives sit on the governing body of an AHP). However, such entities may provide administrative services.
• Adds a geographic component to the “commonality of interest” requirement.
• Strengthens HIPAA non-discrimination rules by adding that an AHP cannot discriminate among employer members based on a health status factor.
• Articulates to more depth interaction with other statutes (i.e. MHPAEA and PDA) and notes that states may regulate self-insured MEWAs to the extent they aren’t inconsistent with ERISA and policy goals.

The final rule is effective August 20, 2018. The rule applies:

• to fully-insured AHPs only beginning 9/1/2018;
• to self-insured AHPs (in existence as of 8/20/2018) beginning 1/1/2019; and
• to new self-insured AHPs beginning 4/1/2019.