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Association Health Plans: What’s going on?! UPDATE!

Author: Chris Free    Posted: March 13, 2015

UPDATE: Association Health Plans Continue!! For now… The court ruled in favor of associations on every count. There is a small opportunity for the federal government to overrule the court, but we are very unlikely to see that.

Here’s the insurance commissioner’s statement regarding the ruling:

http://insurance.wa.gov/about-oic/newsroom/main-statements/statements/2015/07-02-2015.htm

For longer than I’ve been in the employee benefits consulting space (make that about 15 years), Washington State has had a great deal of health plan options for employers that were available through trade associations and insurance trusts. Depending on whose lens you’re looking through, this could be seen as a benefit to Washington businesses and residents because it allowed small employers with healthy populations to get lower insurance costs for their employees by going through large group underwriting – or – it could be seen as raising the cost for employers with average or above average health care concerns because the healthy people were taken out of the larger insurance pools and placed in AHPs and trusts.

The ACA changed the rules of the game for AHPs and trusts.  Trusts, as we knew them, are over.  No question about it. AHPs on the other hand… are more complicated.

In mid-2013, we began discussing the future of Washington State’s Association Health Plan (AHP) market at the Insurance Commissioner’s advisory board meetings. At the time, everyone was trying to get a good understanding of the implications of the ACA on AHPs.  The answer is as clear as mud.

AHPs can continue to exist as long as they can meet the definition of an employer according to the DOL/ERISA definition of an employer.  Unless you’re an ERISA attorney, this probably sounds impossible, but it’s not.

See here: https://www.law.cornell.edu/uscode/text/29/1002  §1002(5) The term “employer” means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.

So, if the Association can meet this requirement and its related tests, the Association is allowed to continue to offer plans to small businesses using large group rules.  If it doesn’t meet this test, it can still offer a health plan to its members, but it must follow all small-group underwriting rules (aka: community rating).

Now, it’s 2015.  Since the year started, we’ve been seeing some real heat around the AHP discussion.  The Insurance Commissioner’s office has decided to start disapproving plans based on whether or not the AHP meets the federal definition of an employer.  There are arguments for and against coming from all directions. There are lawsuits in progress. Some claim a State regulator cannot impose federal regulations, others are sure he can.

I, personally, have kept a constant dialog with the Insurance Commissioner’s office on the progress of these rulings.  While the Seattle Times posted an article about the sky falling (here: http://www.seattletimes.com/seattle-news/health-coverage-in-limbo-for-many-workers ), the truth is far less scary.  According to the Insurance Commissioner (here: http://www.insurance.wa.gov/for-producers/compliance/recent-laws-rules/association-health-plans/index.html ), “If the plan you sell has been disapproved, the health insurer will notify you about the process for moving your clients to new coverage.”

So, hold tight. Don’t go jumping to a more expensive plan. We’re on top of this and will let you know if we need to make any changes.

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