Last week the Labor Department’s Employee Benefit Security Administration released proposed guidance on President Trump’s executive orders related to Association Health Plans (AHPs). Per the Washington Post, “The Trump administration…. promised to crack open the door to alternative health insurance venues for Americans who are self-employed or who work for small businesses that may not offer coverage.” The door did swing open -- but in which direction?
The basic idea is to create greater access and competitive options for small employers and the self-employed via AHPs. The proposed rules directly address a potential expansion of what qualifies as an AHP. AHPs exist today but they are limited to small employers with a “commonality” of industry and other traits (excluding geography) and provide limited options for the self-employed. AHPs were also prohibited from forming for the sole purpose of health care purchasing. The proposed guidance offers the following key changes or openings to this potential market:
- Employers may band together for the express purpose of offering health care coverage, if
- They are in the same trade or industry, line of business or profession, or
- Have a principal place of business within a region that does not exceed the boundaries of the same State or the same metropolitan area
- An employer may include Owners and Sole Proprietors
What are the potential market implications of these proposed regulations? This does open a new potential market for health care coverage – which means that it may damage individual insurance markets and the current public exchanges by attracting good risk out of those programs. While the proposed regulations are a catalyst for this market, creation of an AHP is not simple; there are regulatory requirements, funding issues, state regulations (including Multiple Employer Welfare Association guidance and qualifying group parameters) and insurance carrier partnerships to navigate.
The DOL has also requested comments on the potential of self-insurance for these plans to drive overall lower cost and provide protection under the ERISA exemption. DOL noted that there would need to be protections for the solvency of these plans due to the history of plan failure in this arena. The ability to self-insure these plans could greatly affect their competitive position and also introduce an element of caveat emptor -- buyer beware -- for associations and their membership.
Mercer will hold a national webcast late this month for Associations and other interested parties to review the possibilities in this new market and potential next steps for current associations and other organizations that may be interested in offering healthcare options to their membership. Mercer is currently a leading provider of Association sponsored insurance plans in the US. Let us know here if you’d like an invitation to the webcast and we’ll send you the registration information as soon as it’s available.