Association health plans spark tussle between state regulators, business groups

SOME BUSINESS ASSOCIATIONS and insurers are plunging ahead in launching a cheaper type of health plan now permitted by the Trump administration, while others are holding back due to big regulatory and legal uncertainties about the future of these products.

Since the Labor Department issued a final rule in June allowing small employers and self-employers to band together across state lines and form association health plans, there have been intensive discussions between business groups, state insurance commissioners and federal officials about how states can regulate these plans.

Pennsylvania Insurance Commissioner Jessica Altman has taken the position that AHPs must comply with state laws and Affordable Care Act provisions governing individual and small-group plans. The Labor Department wrote to Altman in August to say the rule “does not modify the states’ existing authority to regulate AHPs under state insurance laws.”

She and other state regulators fret that the growth of AHPs will destabilize their ACA-regulated individual and small-group markets, leave consumers uncovered for healthcare services they need, and lead to a spike in insurance fraud and insolvencies associated with lightly regulated AHPs in the past.

But a coalition of 10 business associations, including the National Federation of Independent Business, argues that federal law does not allow states to bar groups of employers from forming

AHPs together.

Association plans are deemed large-group plans exempt from state regulation under the federal Employee Retirement Income Security Act.

The Nebraska Farm Bureau and Medica in September announced they were teaming up to offer a menu of AHPs in 2019 for individual farmers, ranchers and small agriculture-related businesses. The plans will have essentially the same benefits as ACA market plans with premium savings of up to 25%, they said. Rates will vary based on age, geographic location and type of business.

“We hear stories every day about how farmers and ranchers are struggling to provide affordable coverage for their families,” said Steve Nelson, president of the Nebraska Farm Bureau. “That’s what drove us to put this together.”

The Nebraska Department of Insurance said other business groups also have applied to start AHPs.

In August, three chambers of commerce in Nevada announced they would offer an AHP through UnitedHealth Group that will aggregate small firms into one large-group plan, though they initially aren’t making it available to sole-proprietor businesses.

But other associations say they’re taking a wait-and-see stance, citing resistance to the AHP rule from many state insurance commissioners, combined with a federal lawsuit filed in July by 12 Democratic attorneys general to block the rule.

Since the rule was issued, a number of states have issued emergency rules and bulletins limiting AHPs or highlighting existing state laws that prohibit key features of plans allowed under the new federal rule.

A number of states, includ-

“We hear stories every day about how farmers and ranchers are struggling to provide affordable coverage for their families. That’s what drove us to put this together.” Steve Nelson President Nebraska Farm Bureau

ing Connecticut, Massachusetts, New York, Oregon and Pennsylvania, have said they will look at the small employers and individuals signing up for AHPs and apply state and ACA rules for smallgroup and individual coverage to them, essentially nullifying the AHP structure.

In a Sept. 10 bulletin, the Oregon Division of Financial Regulation said it would follow more demanding federal guidelines issued in 2011 for determining bona fide association plans that qualify for an ERISA exemption from state insurance requirements.

Regulators in Connecticut, Maryland, Massachusetts and New York are taking an even harder line. They say their laws permit no exception for bona fide association plans, so they don’t qualify for an ERISA exemption.

In contrast, the Nebraska Department of Insurance fully recognizes the new AHP rule, including allowing sole proprietors to join association plans. Its officials say they aren’t worried about AHPs drawing younger and healthier people out of the ACA market and driving up premiums because the new plans likely will attract mostly consumers who already have dropped out of the ACA market due to high premiums.

Laura Arp, the department’s life and health administrator, noted that consumer-protection provisions in the ACA and state law still apply to AHPs, including rules prohibiting annual and lifetime benefit caps and discrimination against people with pre-existing medical conditions.

“So this isn’t the wild, wild West,” Arp said. “It’s large-group coverage that’s compliant with ACA coverage provisions for large groups.”●