What Are Association Health Plans? ERISA, MEWAs & Small‑Group Coverage Options
Association Health Plans (AHPs) offer an alternative health coverage option, especially for individuals without a traditional employer/employee relationship. Governed by ERISA, AHPs create opportunities for access to health benefits outside standard employer-sponsored plans. This article explains AHPs, highlights differences from Employer Group Health Plans, and outlines when they qualify as individual plans.
Understanding Association Health Plans:
In 2018, the Department of Labor expanded Association Health Plans (AHPs) to support small businesses and professional groups. These groups could join together for health insurance if they shared a common trade, business, or geographic location. For example, employers must work in the same industry or operate within the same state or metropolitan area. Although the rule faces possible rescission, AHPs still allow small employers to unite and access broader insurance options. By joining forces, employers can increase bargaining power and reduce costs through access to large-group insurance plans.
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 governs employer-sponsored plans, certain provisions allow AHPs to qualify as individual health plans under specific conditions. This classification expands access for individuals lacking a traditional employer/employee relationship. By meeting defined criteria and following clear guidelines, an AHP can operate as an individual health plan.
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, enabling individuals or employers within the group to offer health coverage to their members.
- The association serves as the plan sponsor. Participating employers may share administrative duties or outsource them to a professional administrator.
- AHPs must follow ERISA rules and 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 pool resources, increasing buying power and accessing affordable coverage like large employers.
In Conclusion:
Association Health Plans (AHPs) offer health coverage to individuals without a traditional employer-employee relationship through ERISA-regulated arrangements. When certain criteria apply, ERISA classifies AHPs as individual plans, enabling access to affordable coverage options. Unlike employer-sponsored group plans, AHPs involve different entities and serve distinct purposes in delivering health benefits. Therefore, understanding the differences between employer health plans and AHPs is essential for choosing the right coverage. Through AHPs, small businesses and individuals can gain stronger negotiating power and access more cost-effective health coverage options. Enrollment First, Inc. helps associations and individuals evaluate AHP options and navigate the path toward better healthcare access.
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