BISMARCK, N.D. – Insurance Commissioner Jon Godfread issued the following statement today in response to the U.S. Department of Labor’s issuance of the Final Rule on Association Health Plans (AHPs) on June 19, helping millions of Americans obtain quality, affordable health coverage. The Final Rule will make it easier for small businesses to band together to buy health insurance without some of the regulatory requirements that individual states and the Affordable Care Act (ACA) impose on smaller employers.
“I share President Trump’s concern regarding the cost of health insurance for those who own or work for a small business, farm or ranch. I am pleased that this rule addresses a segment of our population that has long been overlooked by the ACA. It’s these individuals who are driving economic activity in North Dakota that need relief the most,” Godfread said. “We applaud the Administration’s efforts to provide new options for relief to these individuals. However, true comprehensive health insurance reform is still needed. Congress must return full authority to the states so we can rightfully regulate our health insurance markets based upon the unique needs and characteristics of the populations of each individual state.”
The Final Rule modifies the definition of "employer" under the Employee Retirement Income Security Act (ERISA) regarding entities—such as associations—that could sponsor group health coverage. An association can be formed for the sole purpose of offering an AHP to its members.
The broader interpretation of ERISA will let employers that can pass a "commonality of interest" test join together to offer health care coverage to their employees. An association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:
- In the same trade, industry or profession throughout the U.S.
- In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.
Sole proprietors will be able to join small business health plans so long as they join an association that has at least 51 people, which is the number needed for an association to access the small group market. A sole proprietor would also be able to obtain coverage for their spouse and children through the qualified AHP.
AHPs are group health plans that employer groups and associations offer to provide health coverage for their members’ employees. They allow small employers, through associations, to gain regulatory and economic advantages available to larger employers. AHPs have many possible benefits including more coverage options, affordable pricing, less regulatory burden and complexity, and reduced administrative costs. The benefits have been available to small employers previously but the Final Rule provides a new pathway for working owners without employees, including sole proprietors, to join.
The Final Rule does not affect previously existing AHPs, which were allowed—with stricter geographic and commonality restrictions—under prior guidance.
The North Dakota Insurance Department is one of a handful of states in the U.S. to have previously enacted rules designed to regulate AHPs more effectively. These rules are designed to ensure the plans will be appropriately capitalized and grant the Department continuing authority to examine the financial health of each plan. The rules also contain important protections for consumers who enroll in an AHP.
Important dates for AHP expansion under the Final Rule include:
- Sept. 1, 2018 – All associations (new or existing) may establish a fully-insured AHP
- Jan. 1, 2019 – Existing associations that sponsored an AHP on or before the date the Final Rule was published may establish a self-funded AHP
- April 1, 2019 – All other associations (new or existing) may establish a self-funded AHP
It is also important to note that associations looking to form an AHP should ensure they are fully compliant with the nondiscrimination provisions in the regulations, which ensure that AHPs cannot discriminate on the basis of a health factor, or keep certain individuals or employers out of the AHP plan due to health conditions.
“We are prepared and ready to assist consumers as they look at their options following the release of the Final Rule,” Godfread added. “While the Final Rule is not the silver bullet for health care reform, it does take steps in helping self-employed individuals, small businesses and their employees. I highly recommend that small businesses and self-employed individuals interested in exploring this new opportunity contact their insurance agent in order to obtain a comprehensive analysis of options available under the Final Rule.”