Legislative Updates

  Definition of "Employer" under Section 3(5) of ERISA - Association Health Plans RIN 121O-AB85 u.S. Department of Labor -

Employee Benefits Security Administration Issued: 114/18; Publication in Federal Register: 1/5118 Comments due: 60 days after publication in the Federal Register Background:

On October 12,2017, President Trump issued Executive order 13813, "Promoting Healthcare Choice and Competition Across the United States," to direct the U.S. Departments of Labor, Health and Human Services (HHS), and the Treasury to develop rules to expand association health plans (AHPs), short-term limited duration insurance, and health reimbursement arrangements (HRAs). This proposed rule pertains to AHPs only. Additionally, while the proposed rule has been developed in conjunction with Treasury, the Internal Revenue Service, HHS and the Centers for Medicare & Medicaid Services, it does not apply to rules regarding taxation under the Code. Overview: The proposed rule modifies the definition of "employer" under Section 3(5) of the Employee Retirement Income Security Act of 1974 (ERISA) regarding entities (AHPs) that could sponsor group health coverage. Employers Could Band Together for the Single Purpose of Obtaining Health Coverage

The proposed rule allows employers to band together to offer coverage if they either are: 1. in the same trade, industry, line of business, or profession; or 2. have a principle place of business within a region that does not exceed the boundaries of the same State or the same metropolitan area (that crosses State lines - i.e. the DMV metropolitan area) The proposed rule retains existing sub-regulatory guidance regarding the satisfaction of the commonalty definition and seeks comments on possible other conditions to define commonality of interest. The proposed rule also seeks comments on whether there may be manipulations of geographic classification due to health costs and ifthere should be a process for determining the geographic place of business for the members of the AHP. The proposed rule significantly modifies existing sub-regulatory guidance to enable the creation of a new organization with the sole purpose of providing group health coverage (currently, an organization must exist for a bona fide purpose other than providing health coverage). The Group or Association Must Have an Organizational Structure and Be Functionally Controlled by its Employer Members Under the proposed rule, the AHP is required to have a formal organizational structure with a governing body and by-laws, and the group's member employers control its functions and activities such as establishing and maintaining a group health plan. The preamble specifically notes that this is to "prevent formation of commercial enterprises that claim to be AHPs but, in reality, merely operate similar to traditional issuers selling insurance in the group

Group or Association Plan Coverage Must Be Limited to Employees of Employer Members and Treatment of Working Owners Under the AHP proposed rule, only current and former employees of employer members, and their family members and beneficiaries, can participate in the group health plan. The preamble specifically states that "the groups or associations sponsoring the covered AHPs are bona fide employment-based associations ... and not mere general membership organizations essentially operating as unlicensed health insurance providers selling commercial group health coverage to individuals and employers without the type of connection to the employment relationship envisioned by ERISA's section 3(1) definition of employee welfare benefit plan." In regards to an owner of a trade or business without common law employees, the owner can be considered an employee for eligibility in enrollment in the AHP if: the individual is earning an income from that trade or business and working on average 30 hours per week or 120 hours per month. Further, the individual is only then eligible to enroll in the AHP ifhe or she is not eligible for subsidized group health coverage sponsored by another employer or a spouse's employer. The preamble specifies that "[t]he rule is intended to cover genuine employment-based relationships, not to provide cover for the marketing of individual insurance masquerading as employment-based coverage." Health Nondiscrimination Protections The proposed rule applies existing nondiscrimination provisions under the Health Insurance Portability and Accountability Act (HIPAA) and Affordable Care Act (ACA) to AHPs. Additionally, the proposed rule clarifies that a group or association cannot restrict membership based on any health factor and cannot treat member employers as distinct groups of similarly-situated individuals.

 Ron Buffum. AAHU Legislative Chair