DOL Issues Final Regulations on Association Health Plans
Issue: Association Health Plan Regulations
Action Taken: On June 19th, 2018 the Department of Labor (DOL) issued, in final form, a regulation intended to facilitate the formation of Association Health Plans (AHPs).
Background: As the Department has stated, the purpose of the regulation is to facilitate the ability of small employers – including sole proprietors – to form or join an AHP to obtain health insurance coverage in the large group market. The large group insurance market is not subject to the requirements and mandates imposed by the Affordable Care Act (ACA) and may be more affordable than coverage in the small group and individual market. DOL anticipates that most AHPs will be large employer plans. In the regulation, the DOL outlines the following rules and parameters by which an AHP may form:
The rule does not preempt state regulation. AHPs would be subject to all state-level coverage rules that are imposed on health insurance plans.
The Administration has long touted AHPs as a solution for lowering health insurance costs for small businesses. The Congressional Budget Office estimates that four million Americans will be covered by AHPs by 2023, including approximately 400,000 who are currently uninsured. Moreover, DOL estimates that cost savings in annual premiums for small businesses will range from $1,900 to $4,100, and from $8,700 to $10,800 for individuals, depending on the generosity of AHP coverage offered.
Opponents of the rule remain concerned that growth in AHPs could lead to higher premiums for those in the small group and individual markets. Opponents argue that AHPs could consist of employers with a mostly younger and healthier workforce, resulting in adverse selection and therefore higher premiums for older and less healthy workers in the small group and individual markets. The rule’s economic impact analysis acknowledges the likelihood of some adverse selection, but it indicates that the benefits of less expensive insurance will likely outweigh the possible negative effects on the small group and individual markets.
The DOL regulation becomes effective in the following stages: On September 1, 2018, all associations – new or existing – may establish a fully-insured AHP under the new rule. On January 1, 2019, existing associations that sponsored an AHP may establish a self-funded AHP.
On April 1, 2019, all other associations – new or existing – may establish a self-funded AHP.
NAIFA Staff Contact: Steve Kline, Director – Government Relations
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