On June 19, 2018, the U.S. Department of Labor (DOL) issued its highly
anticipated final rule expanding the availability of association health plans
(AHPs). This article provides a brief overview of this topic, which may be
of interest to small employers in Tennessee.
AHPs allow for expanded options
The purpose of an AHP is to allow small employers and others to band
together to obtain coverage in the group insurance market, with the effect
of expanding coverage options for those entities. This sounds like good
news for small employers that currently have limited group coverage
options. However, you should bear in mind that AHPs will be subject to
state laws governing multiple employer welfare arrangements (MEWAs)
and meanwhile are still subject to other federal laws pertaining to
coverage of mental health benefits, no lifetime or annual limits on certain
benefits, and nondiscrimination provisions.
The new regulations include a broader definition of what constitutes a
single “employer” under the Employee Retirement Income Security Act of
1974 (ERISA) than was provided under previous rules. Under the new rule,
multiple employers may be treated as a single “employer” if they have a
“commonality of interest” as defined by the DOL. A commonality of
interest may include (1) being in the same trade/industry/profession or (2)
being located in the same state or metropolitan area. Note that this is an
expanded “either/or” definition—in other words, employers in the same
geographic area may be treated as a single employer even if they aren’t in
the same industry, whereas employers in the same industry may be
treated as a single employer even if they aren’t in the same geographic
In addition, under the new rule, working owners and sole proprietors
(self-employed individuals) may be treated as employers for membership
in an AHP and as employees eligible for coverage under the plan. The new
rule would allow working owners and sole proprietors to participate in
group health policies rather than individual policies.
The new rule states that fully insured AHPs may begin to provide coverage
as of September 1, 2018, so interested small employers should contact their
insurance brokers as soon as possible to ask about these new options.
Also keep in mind that the “new rule” consists of 198 pages of regulatory
guidance, so in making sure your benefits plans remain in compliance,
consultation with an experienced employment benefits attorney is
definitely in order.
This article first appeared in the Tennessee Employment Law Letter on 07/1/2018 and has be reproduced with permission.