CHA News Article

Association Health Plan Final Rule Released
State legislation introduced to protect California from implications of regulation

Yesterday, the U.S. Department of Labor released a final rule that broadens the criteria for determining when employers can join together to provide health insurance to their employees and be treated as a single employer under federal law and regulations, to facilitate the adoption and administration of association health plans (AHPs). The existing requirement that AHPs must be offered to a group of employers with a common employment or business interest would be expanded — under the Employee Retirement Income Security Act of 1974 (ERISA) — so that businesses or groups from different industries, if in the same geographic area, would be considered to have a “commonality of interest.”

While the administration views the regulation as expanding access to affordable health coverage, especially for employees of small employers and certain self-employed individuals, the regulation is viewed by many as a potential threat to the viability of Affordable Care Act (ACA) marketplaces. Rules that apply to large employers instead of those applicable to small group or individual plans would apply to AHPs; therefore, AHPs would not be subject to many of the consumer protections established under the ACA, including the ACA’s 10 essential health benefits. However, under the final rule, AHPs cannot restrict membership based on health status or charge sicker individuals higher premiums. The rule will go into effect on a rolling basis between Sept. 1, 2018, and April 1, 2019, depending on whether the AHP is existing or new, and whether the plan will be self-funded or fully insured. 

 In California, two bills have been introduced to protect Californians from the federal Administration’s actions.

Senate Bill 1375 (Hernandez, D-Azusa) has been introduced to ensure self-employed individuals cannot proclaim themselves  “employees” for the sole purpose of joining association health plans. In doing this, the bill aims to maintain a healthy risk mix and a stable, competitive individual market, to keep Covered California premiums low. Senate Bill 1375 will be heard in the Assembly Health Committee on June 26. In addition, Senate Bill 910 (Hernandez, D-Azusa) would prohibit short-term insurance health plans from being sold in California. The bill passed out of the Assembly Health Committee yesterday.

The final rule is in response to President Trump’s Oct. 12, 2017, Executive Order directing the Secretary of Labor to consider expanding access to association health plans. Additionally, the order directed the Departments of the Treasury, Labor and Health and Human Services to consider 1) expanding coverage through short-term limited duration insurance plans that would not be subject to ACA consumer protections and benefit rules, and 2) expanding flexibility and use of health reimbursement arrangements. CHA submitted comments to the Centers for Medicare & Medicaid Services on the proposed rule amending the definition of short-term, limited-duration insurance to exclude it from individual health insurance coverage; CHA does not support it and is concerned about its impact on the health insurance marketplace in California and throughout the U.S. Proposed regulations related to expanding the flexibility and use of health reimbursement arrangements are forthcoming.