Litigation and legislation keep AHP's guidance moving (2023)

Before the final rules were issued last year, the longstanding DOL guidelines distinguished between "bona fide" AHPs, which have one plan at the membership level, and other AHPs, where each participating employer separately sponsors your own ERISA plan. Bona fide AHPs enjoyed certain advantages over other AHPs under the Affordable Care Act (ACA) and ERISA. But the guidelines set the bar high for bona fide status: Members not only had to have control over the plan, but also had a common interest and a shared economic or representative purpose—separate from benefits—to form the association. (This is now commonly referred to as path 1.)

In October 2017, President Trump signed an executive order directing various agencies to promote choice and access to health care. Management has prioritized three areas for guidance: AHPs; short term and limited term insurance; and health insurance reimbursement agreements. In response, the DOL issued final rules last June, providing an easier way (Path 2) for employer groups or associations to offer AHPs in good faith.

Main provisions of path 2. The final rules:

\N
• AHPs authorized to meet requirements of common interest, if organized by state or metropolitan area, or by common trade, industry, line of business, or profession
\N
• Requires AHPs to be audited by hiring members in both form and operation
\N
• Allowed AHPs to exist primarily to provide health insurance, but also required that they serve a substantial unrelated business purpose, such as hosting conferences or educational opportunities
\N
• Homeowners who work without common law employees can participate in AHPs if they earn an average of 20 hours per week or 80 hours per month or earn at least the cost of their coverage
\N
• Changed non-discrimination requirements passed under the Health Insurance Portability and Accountability Act (HIPAA) that:
\N

─     Prohibit conditionalization of membership from employer to membership based on a health factor

─     Require AHPs to prohibit discrimination based on a health factor in order to qualify for benefits and premiums or contributions

─     Prohibit AHPs from using experience ratings to determine premium rates for a specific working member based on a health factor, but allow discrimination based on non-health factors (e.g., industry or geography)

─     Allow an AHP to pass on various premium costs to its members' employees based on non-health factors (e.g., status and full-time/part-time occupation)

─     Prohibit discrimination based on non-health factors used as a pretext for health status discrimination

\N
• Confirmed that AHPs can take advantage of new rule options or continue to follow previous AHP guidance (path 1)
\N

bottom

Before the final rule was issued last year, long-standing DOL guidelines distinguished between "true" AHPs, which have a single membership-level subscription, and other AHPs, where each participating employer sponsors its own ERISA program. Genuine AHPs have certain advantages over other AHPs under the Affordable Care Act (ACA) and ERISA. But the guidelines set the bar high for bona fide status: Members must not only have control over the program, but also have a common interest and a common economic or representative purpose—regardless of interest—to form an association. (This is now commonly referred to as path 1.)

In October 2017, President Trump signed an executive order directing various agencies to promote choice and access to health care. The government gives priority to three guidance areas: AHP; short term and limited term insurance; and health insurance reimbursement agreements. In response, the DOL issued a final rule last June that provides an easier way (Path 2) for employer groups or associations to provide true AHP.

Main provisions of path 2. Last rule:

• Enables AHP to meet requirements of common interest, whether organized by state or metropolitan area, or by common trade, industry, business, or profession
• Requires the AHP to be audited in form and operation by the employed member
• Let AHPs exist primarily to provide health insurance, but also require them to serve an unrelated substantive business purpose, such as hosting conferences or educational opportunities
• Let job owners with no common law employees participate in the AHP if they work an average of 20 hours a week or 80 hours a month, or at least earn their insurance premiums
• Adoption of amended non-discrimination requirements under the Health Insurance Portability and Accountability Act (HIPAA):

─ Ban on prohibiting employers from joining associations based on health factors

─ Requires the AHP to prohibit discrimination based on health factors in order to qualify for benefits, awards, or contributions

─ Prohibits the AHP from using experience ratings based on health factors to determine insurance rates for specific employer members, but allows discrimination based on non-health factors (e.g., industry or geography)

─ Allows AHP to charge different premiums to its members' employees based on non-health factors (e.g., status and full-time/part-time occupation)

─ prohibiting discrimination based on non-health factors as a pretext for discrimination based on health status

• Confirm that AHP can take advantage of new rule options or continue to follow previous AHP guidance (path 1)

The court's ruling put an end to Path 2 for now. And while the proposed legislation reverses that outcome, it's unlikely to pass anytime soon. Employers can still rely on previous guidelines for forming a bona fide AHP, but should be aware that some states may have different or additional AHP mandates.

Court decision
\NThe court ruled that the DOL had unreasonably expanded the ERISA definition of "employer". The rules were "intended and designed to abolish ACA requirements," the court said, including groups without any real similarity of interests and owners operating without employees, despite Congress's clear intent that ERISA cover benefits that arising from work relationships. As a result, the court concluded, the clauses of the good faith association and employee owner's rule — the clauses that allow path 2 — should be voided.

Notably, the court upheld the non-discrimination requirements that apply to Pathway 2 AHPs. While the requirements place limits on different premium rates based on health status, they do not limit which associations qualify as employers and were therefore not central to the case .

non-application policy
\NThe decision leaves a lot of uncertainty about the final rules, especially for AHPs.already formedAmongst them. Recently released DOLaccompanimentto provide some clarity. Employers participating in insured AHPs are generally required to maintain this coverage through the end of the plan year or, if later, the term of the contract. The DOL and HHS will not seek enforcement with respect to Path 2 AHPs for actions taken prior to the court's decision, provided the AHPs have good faith reliance on the final rules and pay health benefit claims as promised.

For the next plan year or contract period, issuers may only renew coverage for Pathway 2 AHPs if the coverage meets ACA market requirements relevant to employer size (e.g., for small employers, essential health benefits requirements and rules for pay classification). An insurer can meet guaranteed renewal requirements by continuing coverage for any employer who is a member of an association that chooses to continue coverage, either through the master policy with the association or through separate contracts with each employer not affiliated with the association.

Proposal for correction of the law
\NWith language largely reflecting the final rules, the proposed legislation introduced in Congress would amend ERISA to include Path 2 criteria by Democrats.

Remaining route
\NAHPs developed under prior guidance - primarily DOL opinions and prior court decisions - are not affected by the court's decision and may remain unaffected. The following table provides a brief overview of what is allowed and prohibited following the court's decision:

Possible barriers at the state level
\NWhile Path 1 is still viable, state laws can create obstacles for associations trying to establish an AHP. As a type of MEWA, AHPs are subject to federal and state regulation. For example, DOL requirements include complying with HIPAA non-discrimination rules and filing Form M-1. Several states have additional or different AHP requirements than federal guidelines. For example, states can:

\N
• Require memberships to exist for a certain period of time before offering an AHP
\N
• Classify coverage as part of the individual, small group, or large group market based on the size of each member, meaning individuals and small businesses must meet small group market standards, including essential health benefits and community classification requirements
\N
• Prohibit landlords who work without common law employees from participating in an AHP
\N
• Allow an AHP to only cover residents of the state in which it is located
\N

Pad 2 temporarily disabled; Path 1 remains an option

Pathway 2 was temporarily suspended due to the court's ruling. While the proposed legislation reverses this outcome, it is unlikely to pass any time soon. Employers can still rely on previous guidelines for forming a true AHP, but it should be noted that some states may have different or additional AHP mandates.

judicial decision
The court ruled that the DOL had unreasonably expanded the ERISA definition of "employer". The court said that while Congress made it clear that ERISA covered benefits arising from an employment relationship, the rules "are designed to end the ACA enforcement requirement," including groups without any real common interest and property owners . . Consequently, the court concluded that the rule's provisions about bona fide association and ownership of the work—those that allow Path 2—should be set aside.

In particular, the court upheld the non-discrimination requirements applicable to Pathway 2 AHP. While the requirements place limits on different insurance rates based on health status, they do not limit which associations qualify as employers and are therefore not at the heart of the matter, the court said.

no policy
The decision leaves significant uncertainty about the final rule that follows, especially for AHPs.already formedAmongst them. DOLP recently postedguideGet some clarity. Employers participating in a covered AHP are generally expected to maintain that coverage at the end of the plan year or at the end of the contract term. The DOL and HHS will not take any enforcement action with respect to Path 2 AHPs made prior to the court ruling, provided the AHPs have good faith reliance on the final rule and pay health benefit claims as promised.

Issuers may only renew coverage for Path 2 AHPs for the next plan year or contract period if the coverage meets the relevant ACA market requirements for employer size (e.g., for small employers, essential health benefits requirements, and premium classification rules ). An insurer can meet the guaranteed renewable need by continuing coverage for any working member of the association that elects to continue coverage, either through a blanket policy with the association or by entering into a separate agreement with each working member on a non-association basis.

Proposal for correction of the law
Using language that largely reflects the final rule, the proposed legislation in Congress would amend ERISA to include the Pathway 2 standard. But the measure has strong odds - it could win support in the Senate, but has little chance of to pass the Democrat-led House. .

remaining pad
AHPs developed with advance guidance - primarily DOL notices and early court rulings - are not affected by court rulings and can continue unaltered. The table below gives a brief overview of what is allowed and prohibited after the court ruling:

potential obstacle at the state level
While Path 1 remains viable, state law may create obstacles for associations attempting to establish an AHP. A type of MEWA, AHP is federal and state regulated. For example, DOL requirements include compliance with the HIPAA non-discrimination rule and filing the M-1 form. Many states have imposed additional or different AHP requirements through federal guidelines. For example, states can:

• Requires membership to have existed for some time before AHP is offered
• Coverage is classified by the size of each member as part of an individual, small group, or large group market, meaning individuals and small businesses must meet small group market standards, including basic health benefits and community assessment requirements
• Employers without common law employees are not allowed to participate in the AHP
• Allow AHP to cover only residents of your state

Next steps for AHP

The court ruling shook the waters for AHP. But while the final rule may be in flux, viable AHP paths still exist.

Path 1 Analytical hierarchical process. While path 2 is no longer an option for forming an AHP (for now), nothing in our opinion would affect the legitimacy of path 1 or the AHP created under it. The foregoing guidelines remain in effect and can – unless the court decides otherwise – be invoked to form a true AHP. Of course, some states may still prohibit the use of Pathway 1 AHP.

Path 2 Analytical Hierarchical Process. The DOL clarified that currently Path 2 AHPs must honor their commitments and pay valid claims under the policies issued, even if they change as a result of the decision. With no further legal developments in the case, further guidance from the DOL or developments on the Hill, the AHP, formed under the now-defunct rules, will have to make some quick decisions with the help of a lawyer.

Non-Mercer Sources

\N
• Statement aboutNew York v. United States Department of Labor(DOL, 29 april 2019)
\N
• Association Health Insurance Act 2019,RV 2294/S 1170(U.S. Congress, April 11, 2019)
\N
• Press release Association of Healthcare Insurance Act 2019 (Chamber of Senator Enzi, 11 April 2019)
\N
• New York v. United States Department of Labor, nº 18-1747 (D.D.C. March 28, 2019)
\N
• Frequently asked questions about court decisionsNew York v. United States Department of Labor(DOL, 1 april 2019)
\N
• DOL's Final Rule on the Definition of "Employer" Under Section 3(5) of ERISA - Association HealthPlans (federal registration, June 21, 2018)
\N
• Proposed DOL rule on the definition of "employer" under section 3(5) of ERISA - Association and other multi-employer pension plans(federal registration, October 23, 2018)
\N
• press releasein the proposed line (DOL, October 22, 2018)
\N
• Executive Order 13813 (White House, October 12, 2017)
\N

Mercer Law and Policy Resources

Links to resources in the Mercer Select Archive are available to Mercer consultants. Customers can contact their advisors for free copies:

\N
• The Association Health Plan's final rule opens up new opportunities for employers(8 november 2018)
\N

Other Mercer Resources

\N
• Proposed guidelines for association health plans(January 8, 2018)
\N
• New health plan rules for associations open up opportunities for small businesses(June 19, 2018)
\N

Non-Mercer Sources

• indicated inNew York v. United States Department of Labor(Department of Labour, April 29, 2019)
• Association Health Insurance Act 2019,RV 2294/trumpet 1170(U.S. Congress, April 11, 2019)
• Press release Association of Healthcare Insurance Act 2019 (Chamber of Senator Enzi, 11 April 2019)
• New York v. United States Department of Labor, nº 18-1747 (D.C. March 28, 2019)
• Frequently asked questions about court rulingsNew York v. United States Department of Labor(Department of Labour, April 1, 2019)
• DOL Final Rule on ERISA Section 3(5) Definition of "Employer" - Association HealthPlan (federal registration, June 21, 2018)
• DOL Proposed Rule Relating to Section 3(5) of ERISA Definition of "Employer" - Association and Other Multi-Employer Pension Plans(federal registration, October 23, 2018)
• press releaseAbout the Proposed Rule (DOL, October 22, 2018)
• Executive Order 13813 (White House, October 12, 2017)

Mercer Law and Policy Resources

Mercer consultants have access to links to every resource in Mercer's managed profile. Customers can contact their advisors for a free copy:

• The Association Health Plan's final rule opens up new opportunities for employers(8 november 2018)

Additional Resources from Mercer

• Proposed guidelines for association health plans(January 8, 2018)
• New rules for association health plans open up opportunities for small businesses(June 19, 2018)