In June, the US Department of Labor published a final rule making it easier for small businesses and working owners to unite to purchase health coverage under federal law and regulations governing large groups.
The regulation likely will result in some erosion of business for payers selling plans in the small group and individual markets while opening other opportunities for insurers to support association health plans. The regulation applies to fully-insured association health plans on Sept. 1, to existing eligible self-insured association health plans on Jan. 1, 2019, and to new self-insured association health plans on April 1, 2019.
The regulation creates new criteria under Title I of the Employee Retirement Income Security Act of 1974 (ERISA) for being considered the employer sponsor of a group health plan or a single multiple-employer plan. Under the regulation, an association can be considered an employer sponsor if its members are in the same trade, profession, industry or line of business, or if their main places of business are in the same region in one state, or in a metropolitan area sprawling across multiple states.
Many Affordable Care Act (ACA) provisions will still apply to association health plans, including bans on excluding coverage based on pre-existing health conditions, denying coverage based on health factors and imposing lifetime or annual dollar limits on essential health benefits. “These mandates place significant constraints on association health plan benefit designs, but leave ample room for association health plans to offer more tailored, less comprehensive, and more affordable health coverage than is available in ACA-compliant individual and small group markets,” according to the regulation.
However, because the regulation allows association health plans qualifying as large groups to cover some of the ACA’s 10 categories of essential health benefits and not others, it allows associations to craft plans to attract consumers without expensive pre-existing conditions. It allows associations to offer different plans to different groups. For example, an association could offer members living in its state’s main metropolitan area plans with higher premiums than plans offered to members living outside of that area. It could offer a plan that does not cover prescriptions, making the plan unattractive to members with expensive chronic conditions, such as diabetes.
The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) estimated that an additional 4 million Americans would be covered by an association health plan by 2023. About 400,000 are expected to be Americans who would have been uninsured if not for the association plans. The other 3.6 million likely will be individuals who otherwise would have obtained richer, more expensive coverage through the small group and individual markets.