The Rise and Fall of Association Health Plans: A Look Back at the 2018 Ruling and its Pending Rescinding in 2024 

The concept of Association Health Plans (AHPs) has been a subject of debate and controversy in recent years. AHPs aim to provide small businesses and self-employed individuals with affordable health insurance options by allowing them to band together and form associations. This article explores the significant events surrounding the 2018 ruling that expanded AHPs and their potential subsequent rescission in 2024 and will analyze the impact of these developments on current and future AHPs. 

The 2018 Ruling 
In 2018, the U.S. Department of Labor (DOL) announced a ruling that broadened the scope of AHPs. Under this ruling, small businesses or self-employed individuals could join together to form associations for the purpose of offering health insurance – so long as they upheld the commonality of interest requirement and had “at least one substantial business purpose unrelated to offering and providing health coverage or other employee benefits to its employer members and their employees.” Commonality of interest was satisfied “if either (1) its employer members were in the same trade or business; or (2) the principal places of business of their employer members were located within a region that did not exceed the boundaries of the same State or metropolitan area.” Proponents of the ruling argued that it would increase options and reduce costs for small businesses, making healthcare coverage more accessible. 

Perspectives and Statistics on the 2018 Ruling 
Supporters of the 2018 ruling highlighted the potential benefits of AHPs. They argued that by pooling resources, associations could negotiate lower insurance rates and provide businesses with access to more comprehensive coverage. Proponents also believed that AHPs would promote competition in the insurance market, ultimately leading to better coverage options and lower costs for small businesses. 

According to the DOL, the expansion of AHPs was projected to provide healthcare coverage to an estimated 4 million Americans who were previously uninsured or underinsured. The ruling had the potential to particularly benefit self-employed individuals and small business owners who had limited access to affordable insurance options. 

However, critics of the 2018 ruling raised concerns about the potential negative consequences of expanding AHPs. They argued that it could lead to a fragmentation of the insurance market, skewing risk pools and destabilizing the market for traditional individual and small group health plans. Critics feared that healthier individuals and businesses with lower healthcare costs might opt for AHPs, leaving sicker individuals and high-risk businesses in the traditional market. This could result in more expensive premiums for those who need comprehensive coverage. 

Opponents also raised concerns about the potential for AHPs to offer limited coverage and exclude essential health benefits mandated by the Affordable Care Act (ACA). They argued that this could leave individuals and businesses vulnerable to gaps in coverage and inadequate protection against catastrophic medical expenses. 

The Rescission of the 2018 Ruling 
In December of 2023, the Biden administration proposed rescinding the 2018 ruling, effectively limiting the scope of AHPs. The proposal for rescission is primarily driven by concerns over potential adverse effects on the individual and small group insurance markets, particularly for those who require comprehensive 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 operating under ERISA must adhere to the legal obligations and responsibilities outlined in the act. ERISA compliance ensures participant protections and accountability for plan fiduciaries, and not abiding by ERISA regulations could cause an AHP to be terminated.  Watch for our next blog explaining ERISA compliance required for AHPs and Employer Group Health Plans. 

The rise and fall of AHPs exemplify how policy changes can shape the healthcare landscape. The 2018 ruling aimed to provide greater access to affordable health insurance options for small businesses and self-employed individuals, while its pending rescission in 2024 attempts to address concerns about potential market disruptions and the quality of coverage. The debate surrounding AHPs highlights the ongoing push and pull between expanding access to health coverage and maintaining market stability. Enrollment First, Inc. is a knowledgeable resource for associations regarding health plan options. 

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