Enrollment First, Inc.

Explaining Association Health Plans 

Explaining Association Health Plans 

Explaining Association Health Plans: Understanding the Role of ERISA and Offering Coverage to Individuals 

Association Health Plans (AHPs) have gained attention as an alternative option for health coverage. These plans, governed by the Employee Retirement Income Security Act (ERISA), provide opportunities for individuals who do not have an employer/employee relationship to access health benefits. In this article, we will explore the concept of AHPs, their distinction from Employer Group Health Plans, and how they can serve as individual plans under certain circumstances. 

Understanding Association Health Plans: 

In 2018, a Department of Labor (DOL) ruling broadened the scope for Association Health Plans (AHPs) to allow small businesses, trade associations, or professional organizations to band together to offer health insurance to their members or affiliated individuals, so long as commonality of interest was satisfied. Employer members must be in the same trade or business, or the principal places of business of employer members are within the boundaries of the same state or metropolitan area. While this ruling is currently proposed for recission, these plans enable employers to join forces, increasing their bargaining power and potentially achieving cost savings by accessing insurance options usually available to larger groups. 

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: 

While ERISA primarily governs employer-sponsored benefit plans, including AHPs, there are provisions that allow for AHPs to be classified as individual plans. This classification can provide access to individuals who do not have an employer/employee relationship. By meeting certain criteria and operating within specific guidelines, an AHP can be deemed an individual plan. 

Important Distinctions: Employer Group Health Plans vs. Association Health Plans 

  1. 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. 
  1. Association Health Plans (AHPs): 
  • AHPs are established and maintained by associations, allowing individuals or employers within the association to offer health coverage to their members. 
  • The association acts as the plan sponsor, and administrative and financial responsibilities may be shared among participating employers/members or outsourced to a professional administrator. 
  • AHPs are subject to ERISA regulations and must meet specific criteria to qualify for ERISA’s protections and operate as an individual plan. 

Single Employer and Multiple Employer Welfare Arrangement (MEWA) Defined: 

  1. Single Employer: 
  • Refers to an employer that establishes a health plan exclusively for its employees. 
  • The employer funds and administers the plan. 
  1. 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 enable small businesses and independent employers to pool their resources to access affordable coverage similar to that available to larger employers. 

In Conclusion: 

Association Health Plans (AHPs) provide a pathway for individuals without an employer/employee relationship to access health coverage. Governed by ERISA, AHPs can be classified as individual plans when specific criteria are met. Understanding the distinction between Employer Group Health Plans and Association Health Plans is crucial, as each serves a different purpose and involves different entities in offering coverage. By exploring the options presented by AHPs, individuals and small businesses can access increased negotiating power and more affordable health coverage. Enrollment First, Inc. is a knowledgeable resource for associations regarding health plan options and individuals who are considering purchasing. 

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