Modern Options Beyond Traditional ACA Plans
Explaining Association Health Plans: Understanding the Role of ERISA and Offering Coverage to Individuals
Association Health Plans (AHPs) continue gaining attention as alternative health coverage for nontraditional workers and small business owners. Governed by ERISA, AHPs let individuals without employer-employee relationships access valuable health benefits through professional or trade associations. In this article, we explain how AHPs differ from Employer Group Health Plans and when they qualify as individual coverage.
Understanding Association Health Plans:
In 2018, the Department of Labor (DOL) expanded AHP eligibility, allowing small businesses and associations to offer group health coverage. To qualify, members needed a common interest—either sharing a trade or operating within the same state or metro area.
Although the rule now faces proposed rescission, it still allows employers to unite, strengthen bargaining power, and access lower-cost plans. By joining together, smaller groups can access insurance options typically reserved for large employers, improving affordability and plan variety.
ERISA’s Role in Association Health Plans:
ERISA establishes the legal framework for AHPs, overseeing their compliance and providing certain protections to participants. ERISA’s regulations can help streamline administrative processes and improve efficiency for employers offering health benefits through an AHP.
AHPs as Individual Plans:
Although ERISA mainly governs employer plans, it allows AHPs to qualify as individual plans under certain conditions and criteria. This classification lets individuals without employer-employee relationships access health coverage through well-structured, compliant AHP arrangements. When AHPs meet ERISA guidelines and requirements, they can legally operate as individual health plans under federal law.
Important Distinctions: Employer Group Health Plans vs. Association Health Plans
- Employer Group Health Plans (EGHPs):
- EGHPs are offered by individual employers to their employees.
- An employer is the sponsor and typically funds a significant portion of the coverage.
- EGHPs must adhere to various rules and laws, including the ACA provisions and ERISA’s requirements.
- Association Health Plans (AHPs):
- Associations establish and maintain AHPs, allowing individuals or employers within the group to offer health coverage to their members.
- The association serves as the plan sponsor, while members may share administrative duties or hire a professional to manage responsibilities.
- AHPs follow ERISA regulations and must meet specific criteria to gain ERISA protections and operate as an individual health plan.
Single Employer and Multiple Employer Welfare Arrangement (MEWA) Defined:
- Single Employer:
- Refers to an employer that establishes a health plan exclusively for its employees.
- The employer funds and administers the plan.
- Multiple Employer Welfare Arrangement (MEWA):
- MEWA is a type of AHP that allows multiple employers to offer health coverage to their employees.
- MEWAs can be established by associations or organizations representing multiple employers or by unrelated employers with a commonality of interest.
- These plans let small businesses and independent employers join together, pool resources, and access affordable coverage like large employers enjoy.
In Conclusion:
Association Health Plans (AHPs) offer health coverage to individuals lacking a traditional employer-employee relationship. Governed by ERISA, AHPs qualify as individual plans when they meet specific legal and organizational criteria.
Understanding the differences between Employer Group Health Plans and AHPs is essential, since they involve different structures and coverage purposes.
By evaluating AHP options, individuals and small businesses can improve negotiating power and access more affordable health insurance solutions.
Enrollment First, Inc. offers expert guidance for associations and individuals exploring health plan options outside traditional employer-sponsored plans.
Sources:
[1] Department of Labor – ERISA: https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/erisa-basics
[2] Association Health Plans: https://www.dol.gov/general/topic/association-health-plans
[3] Department of Labor – Association Health Plans Final Rule: https://www.federalregister.gov/documents/2018/06/21/2018-12992/definition-of-employer-under-section-3-5-of-erisa-association-health-plans
[4] Department of Labor – An Employer’s Guide to Group Health Continuation Coverage Under COBRA: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra_continuation/employer-sponsored-groups.pdf
[5] Multiple Employer Welfare Arrangements (MEWAs): https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/multiple-employer-plans
[6] Multiple-Employer Welfare Plans – Technical Release 95-02: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/mewa/mewa-guide.pdf