Opening the AHP floodgates? Part 2

In Part 1 of our two-part series on the new Association Health Plan (AHP) regulations, we focused on the headline-worthy rules:  effective dates, the types of entities that can offer an AHP, and the expanded definition of “employer” (to include Sole Proprietors!). Part 2 of our series is less glitzy; however, we delve into equally important rules, such as minimum benefit standards, filing and solvency requirements, and the state’s role.

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​In Part 1 of our two-part series on the new Association Health Plan (AHP) regulations, we focused on the headline-worthy rules:  effective dates, the types of entities that can offer an AHP, and the expanded definition of “employer” (to include Sole Proprietors!). Part 2 of our series is less glitzy; however, we delve into equally important rules, such as minimum benefit standards, filing and solvency requirements, and the state’s role.  

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Minimum Benefit Standards
New AHPs, allowed under the revised regulations, must still comply with large group rules and regulations that other single large employers must follow. This includes employee notice requirements, Summary Plan Descriptions, and Summary of Benefits & Coverage, to name just a few. 

​With regards to AHP plan benefits, the following are required (this is not an exhaustive list):

• State benefit mandates must be included if AHP is fully insured (the state can extend these to self-funded AHPs as well)
• Rates charged cannot be higher for individuals based on their health conditions
• Enrollees with pre-existing conditions cannot be excluded
• If offering coverage to children, must cover to age 26
• For any Essential Health Benefits offered, no lifetime or annual limits are allowed
• Enrollment waiting periods can be no longer than 90 days
• Procedural protections must be included to govern appeals of denied health claims
• Special enrollment rights (e.g., due to birth, marriage, etc.) must be provided

For AHP plans that are non-grandfathered, they will also need to provide:

• Maximum out of pocket limits for Essential Health Benefits 
• Preventive services without cost-sharing
• The ability to see a primary care provider, OB/GYN, and pediatrician without a referral or prior authorization
• Emergency room services at in-network levels when obtaining care from a non-network facility and/or provider

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​State Authority
States also retain the authority to adopt minimum benefit standards for AHP programs, including standards similar to those that apply to individual and small group insurance policies under the ACA. However, the new regulations include some interesting wording:  

…ERISA Section 514(b)(6) provides a potential future mechanism for preempting state insurance laws that go too far in regulating non-fully-insured AHPs in ways that interfere with the important policy goals advanced by this final rule."

​The final rule is not the appropriate vehicle to issue opinions on whether any specific state law or laws would be superseded because of the final rule.”

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Setting a Specific AHP’s Rules
The new AHPs are specifically permitted to charge different premiums to different member employers. While these rate differences cannot be based on health factors, distinctions can be made in ratings due to age, gender, industry, and occupation. 

​A group or association (or their insurer) can limit the employers they will cover (e.g., exclude sole proprietors); place limitations on open enrollment periods, plan designs, and employer classes; and institute wellness benefits and rewards. Like in the large group market, plans can exclude one or more of the 10 Essential Health Benefits and they do not need to meet Minimum Value (covering 60% or more of costs, actuarially). An AHP under the new rules can also offer different coverage packages to different classes of employers within the group or association. For example, offering different packages to retailers versus restaurants. 

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Filing & Solvency Requirements
Since AHPs are automatically considered Multi-Employer Welfare Arrangements (MEWAs), they are required to file Form M-1 and Form 5500, regardless of their size or funding arrangement. They must indicate on Form M-1 whether they are in compliance with a number of ERISA’s minimum health plan standards and general requirement that plans hold assets in a trust. 

All MEWAs are also required to register with the Secretary of Labor (at the Federal level) prior to operating in a state. The Secretary may issue an ex parte cease and desist order if it appears that the alleged conduct of a MEWA is fraudulent or creates an immediate danger to the public’s safety or welfare. They can also issue a summary seizure order if it appears that the MEWA is in a financially hazardous condition.

As for states, they can require self-insured AHPs to meet the same solvency and governance standards as insurance carriers. They can mandate that AHPs participate in guaranty funding that protects policyholders when issuers fail. Plus, a state can clarify or enact laws allowing the insurance department to place an AHP into receivership if needed. 

​The Department of Labor has noted that they may add new reporting requirements, which would focus on capturing data to minimize the risk of unpaid claims. They are also considering imposing AHP-specific audit requirements with conditions that would be designed to identify and minimize potential risk of an AHP failing to pay health claims when due. 

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​Conclusion
Will groups and associations consider offering an AHP under the new “like employers” and/or “like geography” rules? Will they include employers who are business owners, without common law employees? Will insurance carriers let them? Will the State Insurance Commissioner impose additional rules on these programs?  Of course, all of these questions are as yet unanswered.  We’ll keep watching closely.