The Department of Labor (“DOL”) has proposed that the Association Health Plan (“AHP”) regulations be revoked and replaced with stricter standards that provide additional employee protections.
Background. The group health plan market is divided into the small group market and the large group market. The size of the individual employer determines whether that employer’s coverage is subject to the small group market or large group market rules.
Under the Affordable Care Act (“ACA”), health insurance provided in the small group market must be “community rated,” meaning that it must satisfy rigid underwriting requirements designed to avoid different premiums based on health factors. It must also cover all essential health benefits (“EHBs”) required by the ACA without annual or lifetime limits.
NOTE: EHBs include: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; lab services; preventive and wellness services; chronic disease management; and pediatric services.
The foregoing requirements do not apply to health insurance offered in the large group market.
Under the ACA, a “bona fide” group or association of employers may sponsor a single “multiple employer” group health plan even though the plan covers many small employers. In instances where a group or association of employers is sponsoring the group health plan, the association itself is deemed the “employer.” Therefore, a bona fide group of small employers could be considered a single large employer for group market purposes and therefore exempt from the small group market rules.
On June 21, 2018, DOL issued final regulations (the “2018 AHP Rule”) intended to broaden the types of employer groups and associations that could sponsor a single group health plan under the ACA.
Rescission of 2018 Regulations. DOL now says the 2018 regulations may deprive employees of small employers of protections Congress thought they needed when enacting the ACA. Consequently, “it is appropriate to propose to rescind the regulatory provisions adopted in the 2018 AHP Rule in order to ensure that guidance being provided to the regulated community is in alignment with ERISA’s text, purposes, and policies, resolve and mitigate any uncertainty regarding the status of the standards that were set under the 2018 AHP Rule, and facilitate a reexamination of the criteria for a group or association of employers to be able to sponsor an AHP.”
The DOL’s proposal is available at: https://www.federalregister.gov/documents/2023/12/20/2023-27510/definition-of-employer-association-health-plans