On Tuesday, June 18, 2018, The U.S. Department of Labor (“DOL”) released its long-anticipated final rule on association health plans, allowing small businesses to band together by geography or industry to create health plans as if they were a single large employer. Association health plans will not be subject to the Affordable Care Act’s essential health benefits requirements, which compel plans to cover mental health and substance abuse treatment, maternity care and ambulance rides, among other things, according to the 200-page text of the final rule. The final rule is part of the administration’s plan to encourage competition in the health insurance markets and lower the cost of coverage, in concert with President Trump’s Executive Order “Promoting Healthcare Choice and Competition Across the United States.” Under the rule, association health plans cannot restrict membership based on health status or charge sicker individuals higher premiums, which were two of critics’ biggest concerns about expanding association health plans.
The rule also broadens the definition of an “employer” under the Employee Retirement Income Security Act of 1974 (“ERISA”), to allow more groups to form association health plans and bypass rules under the Affordable Care Act. ERISA is the federal law that governs health benefits and retirement plans offered by employers. The rule has raised concerns that certain health plans now violate the ACA, an allegation the DOL firmly denies. The DOL claims that association health plans are considered large group health plans, which are not subject to the ACA.
Labor Secretary Alexander Acosta stated that as many as 4 million people will gain coverage under the new plan offerings in the coming years. The government’s estimates are in line with Avalere Health’s prediction that as many as 4.3 million people will leave the individual and small-group insurance markets to enroll in association health plans over the next five years.
Association health plans will go on the market September 1, 2018. Self-employed workers can join association plans under the new regulation, and groups that want to form an association plan do not need to have another purpose beyond providing health coverage to members. States will still maintain oversight and share in the enforcement with the federal government.