The Rise and Fall of Association Health Plans: A Look Back at the 2018 Ruling and its Pending Rescinding in 2024
In recent years, Association Health Plans (AHPs) have sparked ongoing debate and controversy among policymakers, businesses, and industry experts. AHPs allow small businesses and self-employed individuals to join together to access more affordable health insurance options.
This article reviews key events from the 2018 ruling that expanded AHPs and the proposed 2024 rescission. It also examines how this policy shifts may affect the structure and future availability of AHPs moving forward.
The 2018 Ruling
In 2018, the U.S. Department of Labor (DOL) issued a ruling that significantly expanded the scope of AHPs. As a result, small businesses and self-employed individuals could form associations to offer health insurance coverage. To qualify, associations needed a common interest and at least one major business purpose unrelated to providing health benefits.
They could meet the “commonality of interest” rule by sharing a trade or being located in the same state or metro area. Supporters claimed this ruling would expand health coverage options and lower costs for small businesses and self-employed individuals.
Perspectives and Statistics on the 2018 Ruling
Supporters of the 2018 ruling emphasized the advantages AHPs could offer to small businesses and self-employed individuals. They argued that pooling resources would help associations negotiate lower insurance rates and offer broader health coverage to their members.
Additionally, proponents believed AHPs would increase competition in the insurance market and improve plan options for small business owners. According to the DOL, expanding AHPs could extend coverage to 4 million previously uninsured or underinsured Americans.
This projection included many self-employed workers and small businesses lacking access to affordable, comprehensive health insurance options.
However, critics of the 2018 ruling warned about serious risks tied to expanding Association Health Plans (AHPs). They argued the expansion could fragment the insurance market, disrupt risk pools, and weaken traditional individual and small group plans.
Critics feared healthier groups might choose AHPs, leaving higher-risk individuals behind in the traditional market with rising premiums. As a result, people needing comprehensive coverage could face higher costs and fewer viable insurance options.
Opponents also cautioned that AHPs might exclude essential benefits required by the Affordable Care Act (ACA). They believed limited coverage could expose individuals and businesses to gaps and large out-of-pocket medical expenses during serious illness or injury.
The Rescission of the 2018 Ruling
In December 2023, the Biden administration proposed rescinding the 2018 ruling to restrict the scope of AHPs. This proposal followed growing concerns about negative impacts on individual and small group markets needing comprehensive health coverage.
The proposal to roll back the ruling has been met with mixed reactions. While critics of AHPs and proponents of the ACA applauded the move, supporters of expanding AHPs have expressed disappointment, as they believed it will limit health insurance options for small businesses and self-employed individuals.
Impact on Current and Future AHPs
The rescission of the 2018 ruling would affect both existing and future AHPs. Existing AHPs may be required to re-evaluate their operations and comply with the revised regulations. Some AHPs, which had been formed under the 2018 ruling, may have to restructure or cease operations altogether due to this type of change in regulations.
Future AHPs will would have limited flexibility, with stricter regulations imposed by state and federal authorities. While AHPs still exist, they will be subject to more stringent requirements, which may impact the affordability and accessibility of coverage for small businesses and self-employed individuals in some instances.
The Role of ERISA
The Employee Retirement Income Security Act (ERISA) plays a significant role in governing AHPs. ERISA provides a legal framework for the establishment, administration, and governance of employee benefit plans, including AHPs. It sets standards for plan fiduciaries, disclosure requirements, and protections for participants.
AHPs governed by ERISA must follow all legal duties and responsibilities defined in the act to remain compliant. ERISA compliance protects participants and holds plan fiduciaries accountable, while noncompliance can result in plan termination.
Stay tuned for our next blog covering ERISA requirements for AHPs and Employer Group Health Plans.
Conclusion
The rise and fall of AHPs show how policy shifts reshape the healthcare landscape over time. The 2018 ruling sought to expand affordable insurance access for small businesses and self-employed individuals.
However, the pending 2024 rescission aims to address concerns about market disruption and reduced coverage quality. This ongoing debate reflects the balance between expanding access and maintaining insurance market stability.
Enrollment First, Inc. offers expert guidance to associations exploring compliant and effective health plan options.
Source links:
- U.S. Department of Labor: [https://www.dol.gov/newsroom/releases/ebsa/ebsa20231219]
- Federal Register: [https://www.federalregister.gov/documents/2023/12/20/2023-27510/definition-of-employer-association-health-plans]
- Health Affairs: [https://www.healthaffairs.org/do/10.1377/hblog20191001.785603/full/]