Association Health Plan Update
Association Health Plan Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- Politico came out with a pretty negative story about association health plans (AHPs) last week.
- Analysis: I like Politico’s reporting. I always have, and I always will. But, in this case, Politico needed to do a better job canvassing all of its sources before coming out with conclusions that are NOT accurate. In addition, Politico should have steered clear of over-sensationalizing a story that is primarily driven by their desire to prove that comments made by President Trump are wrong. What do I mean? As we all know, President Trump says a lot of things. And one of the things President Trump has said about AHPs is that “millions of people” are signing up for coverage. Unfortunately, it appears that Politico wanted to push back on the President’s comments. And they did so by inaccurately describing the position held by one of the long-time proponents of AHPs – the National Federation of Independent Business (NFIB). What did Politico say? They said that the NFIB thinks that the DOL’s AHP regulations are “unworkable.” Does the NFIB think the DOL AHP regulations are “unworkable”? NO. What does the NFIB think about the DOL AHP regulations? NFIB’s optimal goal is to establish an AHP that can provide AHP health coverage nationwide to all of NFIB’s small business members. In other words, the NFIB wants to establish one BIG national plan that provides health coverage to millions of small businesses. Unfortunately for the NFIB, that is NOT what the DOL AHP regulations allow. What does the DOL regulations allow? For organizations to be able to offer AHP health coverage on a nationwide basis, the organization’s members MUST be in the same industry. In other words, “industry-specific” organizations CAN offer AHP health coverage to all of their members nationwide. However, organizations with members in DIFFERENT industries can ONLY offer AHP health coverage in a particular State or Metropolitan area. In other words, organizations like the NFIB – which is an organization full of small employers in DIFFERENT industries – the NFIB can ONLY offer AHP coverage to their “non-industry-specific” employer members that are domiciled in the same State or Metropolitan area. This means that if the NFIB wants to offer AHP health coverage to all of its small employer members, the NFIB MUST set up 50+ different AHPs to do so. Interestingly, in their comment letter to the proposed AHP regulations, the NFIB asked the DOL to expand the “industry-specific” rule to include “employers of a certain size.” If granted, the NFIB could have offered coverage on a nationwide basis. BUT, the DOL did NOT grant the NFIB’s request, leaving in place a rule that limited an organization like the NFIB – again, an organization full of employer members in DIFFERENT industries – to only being able to offer AHP health coverage in a particular State or Metropolitan area.
So Does This Mean the NFIB Thinks the DOL AHP Regulations Are “Unworkable”?
- NO. But don’t take my word for it. Ask the NFIB. They actually issued a response to the Politico article explaining much of what I explained above. The NFIB response also touched on some of what I explain below.
- Analysis: Here’s why the NFIB supports the DOL AHP regulations, and why they think the regs are indeed “workable”: The AHP regulations make a very important change to the way the Obama Administration required insurance carriers to treat an organization full of employers in DIFFERENT industries that sponsored an AHP. You have heard me talk about this rule, but it is worth repeating because while the NFIB did not get everything it wanted out of the DOL AHP regulations, this is one change that the NFIB – and other organizations like Local Chambers of Commerce – believe is a winner:
- In 2011, the Obama Administration told insurance carriers under-writing AHP coverage for employers in DIFFERENT industries that they had to “look through” the association to the underlying size of the employer member, and if the employer employed 50 employees or fewer, the carrier was REQUIRED to impose the ACA’s “small group” market reforms on this employer (if there were self-employed individuals in the “group,” the ACA’s “individual” market rules must be applied). BUT, the recently released DOL AHP regulations changed this rule, saying that an organization full of employers in DIFFERENT industries do NOT have to be treated like a bunch of separate employers that are subject to the ACA’s insurance rules based on their underlying size or if they were an individual. Instead, the organization full of DIFFERENT employers COULD be treated as a “large” employer plan, and therefore, NOT subject to the ACA’s “small group” or “individual” market reforms. BUT, for this special treatment, the “group” of employers MUST be located in the same State or Metropolitan area. If you read the Politico article, you would NOT have known that this change in law is a BIG deal. Why is it a BIG deal? Because organizations like the NFIB, Local Chambers of Commerce, and other organizations with State-based chapters – who could NOT offer “large” employer coverage through an AHP under the previous Administration – can NOW offer a “large group” health plan (as opposed to “small group” or “individual” market plan) to their members. Although this change is a big deal, is it ideal for the NFIB? NO. Because the NFIB wanted to offer “large” employer coverage to ALL of its small employer members nationwide. BUT, this change is ideal for NFIB local chapters because they can now offer “large” employer coverage through their own State-based (or Metropolitan-based) AHP. Alternatively, the local NFIB chapters can partner with a Local Chamber of Commerce or other local employer-run organization to offer a “large group” plan to their members. Again, you would NOT have known all of this from the Politico article.
Do Other Organizations Think the DOL AHP Regulations Are “Unworkable”?
- NO. And if Politico would have asked me, I would have told them NO. If asked, I would have told them that there are a number of organizations that are taking steps toward establishing an AHP, either to offer coverage on a nationwide basis or within a State.
- Analysis: One thing I do agree with Politico on is this: Millions of people are NOT currently signing up for coverage, contrary to what the President has said publicly. Why? Well first, the AHP regulations are only a month and 3 days old. Every interested organization was waiting for the final regulations to figure out what the legal landscape looked like. For example, the NFIB was hoping that the DOL would grant them their “ask” and allow organizations with “employers of a certain size” to offer coverage on a nationwide basis. That did not happen so guess what, the NFIB is not setting up a national plan. But that does NOT mean that other organizations – in particular, “industry-specific” organizations – are not setting up a national plan. They ARE INDEED taking the necessary steps to set up a national plan. How do I know? Because I am currently helping some “industry-specific” organizations set up a national plan for their members.
If Politico would have written the following, I would not be so critical of their reporting:
- Establishing an AHP is NOT going to be a cake-walk. Organizations have to first determine if they can form a “risk pool” that not only results in a lower costing health care option than the current markets, but a “risk pool” that is sustainable over the long-term. If an organization believes they can maintain a sustainable “risk pool” for the long-term, the organization then has to decide if wants its AHP coverage to be fully-insured or self-insured. If the organization goes fully-insured, the organization must go out and find an insurance carrier that is willing to under-write their AHP health coverage. If the organization wants to offer fully-insured AHP coverage on a nationwide basis, they will need contract with a national insurance carrier to ensure that they have adequate provider networks for their planholders in each State (or they will have to work out an arrangement with the Blue plans to “share” the coverage offered to planholders in multiple States (similar to the Blues’ current “blue card” program)). Once the organization secures a willing insurance carrier, the organization may then have to meet with the State Insurance Commissioners in the various States to get “sign-off” to offer their fully-insured AHP coverage in that respective State. The organization must also determine if the insurance rules (e.g., the benefit mandates) that apply to the AHP coverage are going to be uniform, or whether the organization is going to have to comply with 50 different State benefit mandates. For example, one State – or a couple of States – may enact a law that imposes the ACA’s “essential health benefits” on fully-insured AHP coverage, while a number of other States choose NOT to impose the EHBs on fully-insured AHPs. In this case, what’s it going to be? Will the fully-insured AHP have to cover the EHBs in some States, but not others? The NAIC could help resolve this issue by applying a “best practice” that the insurance industry follows in the case of single-employer fully-insured plans. According to this “best practice,” the benefit mandates of the State in which the insurance contract is signed by the carrier and the employer (called the “situs State”) will “follow” the fully-insured plan into the other States where the coverage is offered, meaning the benefit mandates of the “situs State” are the ONLY benefit mandates that apply to the coverage offered in the other States. This “best practice” is intended to provide uniformity in the law as it relates to the types of benefit mandates that apply to a fully-insured plan. BUT, this is just a “best practice.” States are allowed to do whatever they want, and some currently do when it comes to single-employer fully-insured plans. For example, some States impose what they call “extra-territorial” benefit mandates, which are mandates that apply in addition to the “situs State’s” benefit mandates. The NAIC, however, discourages “extra-territorial” benefit mandates. Soooo, the $64 million question is whether the NAIC will apply this same “best practice” to fully-insured AHPs offered on a nationwide basis. If the NAIC does NOT apply this same “best practice” – or if the NAIC does, but a number of anti-AHP States choose to ignore the “best practice” – then “industry-specific” organizations that are currently taking the necessary steps to offer a national plan will have a tough time offering their AHP coverage nationwide.
What About Organizations That Want to Offer Self-Insured AHP Coverage Nationwide?
- For “industry-specific” organizations that want to offer a national self-insured AHP, I would say that the current law is “unworkable.” It’s not that the DOL AHP regulations are “unworkable”…it’s that current law is “unworkable.” Why?
- Analysis: Again, I have explained this before, but it worth repeating: ERISA gives States the exclusive authority to impose any insurance law on self-insured AHPs. And, every State does through a State MEWA law. Importantly, State MEWA laws are different from one and another. Just as important is the fact that a self-insured AHP must meet each State MEWA law in each State in which the coverage is offered. Trying to comply with a “patchwork” set of insurance and licensing requirements is prohibitive. As a result, the current environment for self-insured AHPs is “unworkable.” But you wouldn’t know it if you read the Politico article. Politico could have explained that the DOL – and President Trump himself – could help resolve this issue by developing a “class exemption” so self-insured AHPs would be exempt from the “non-solvency” requirements of State MEWA laws, provided certain Federal requirements are met. Although State solvency requirements would continue to apply to self-insured AHPs, a “class exemption” would provide much needed uniformity in law, which would allow – and encourage – organizations to offer self-insured AHP coverage on a nationwide basis. The bottom-line is this: There is a lot that has to go into establishing a fully-insured or self-insured AHP. And, the current legal and practical landscape is NOT a hospitable environment for AHPs. BUT, this is NOT discouraging organizations from taking steps to establish an AHP. I would expect that we will see some “early adopters” by Jan. 1, 2019, offering a national fully-insured AHP to “industry-specific” organization members. In time – if the DOL develops a “class exemption” for self-insured AHPs – I could also see national self-insured AHPs. There is a reason why the Congressional Budget Office (CBO) said 4 million people will be covered by an AHP by 2023.
DC’s “Individual Mandate” Provision and Anti-AHP Language
- Like New Jersey before it, DC recently enacted an “individual mandate” penalty tax (mirroring the Federal penalty tax) applicable to DC residents who do not obtain health coverage for the year. Also like NJ, DC included specific language in its mandate that would NOT count health coverage offered through an AHP as “minimum essential coverage” for purposes of the penalty tax. Specifically, if a DC resident is covered by an AHP established after Dec. 15, 2017, this DC resident would be exposed to a penalty tax (even though the DC resident had coverage as good as a “large” employer plan).
- Analysis: Why did DC include this anti-AHP language in its individual mandate provision? Well for one, the DC Exchange commissioned a study to determine the impact the AHP regulations might have on DC’s “small group” market. The results of the study: 90% of DC’s “small group” market would migrate to an AHP. Like me, DC said, WOW, 90%! So, in an effort to protect its “small group” market, DC Exchange officials convinced the DC Council to include the anti-AHP language in DC’s individual mandate provision. Let me digress here to comment on this 90% statistic: On the one hand, the fact that DC’s “small group” market would more-or-less evaporate on account of the AHP regulations could indeed be concerning (at least to those who want to protect the “small group” market). But on the other hand, the fact that 90% of small employers in DC would migrate to a different option for health coverage (other than DC’s “small group” plans) is STRIKING. To me, this statistic speaks volumes, and it tells me that small employers are voting with their feet. So why lock small employers into a market that these employers appear to think is broken?? I am not a libertarian-type, but man, that just seems egregious to me. This tells me that DC – and their Exchange officials – want to protect DC’s “small group” market so badly that they are willing to hold millions of small employers hostage and force them to continue to pay exceedingly high premiums instead of allowing them to choose what type of health coverage they should offer to their employees. If anything, Politico should be writing about this. At this point, it is unclear whether the DC individual mandate – and their anti-AHP language – will go into effect. House Republicans have already included in the DC “appropriations” bill an amendment that would bar funding for implementing DC’s individual mandate. A similar amendment could be added in the Senate, but it is likely that Congressional Democrats will oppose the inclusion of any such restriction on funding, which could derail Republicans’ efforts to make good on their promise to enact all of the appropriations bills before the mid-term elections. Stay tuned.