Anassociation wishing to offer a health plan will have to have a fullunderstanding of the state regulations that will apply to theirplan and pay close attention to the politics in their state.(Photo: Shutterstock)

In June, the Trump Administration announced the returnof association health plans (AHPs) with the ideathat small businesses and other groups will now beallowed to band together to buy health insurance. Such plans wouldbe a more-affordable plans as an alternative to the Affordable Care Act.

Associations that wish to offer an AHP under the new federalregulation might be dismayed to learn that further information willbe necessary before a plan can begin enrolling participants.

Related: Two opportunities created by association healthplans

At the most basic level, an association first needs to ensure itmeets the new commonality of interest test, and the employercontrol test.

Under the commonality of interest, employers within anassociation can offer an AHP if they are in the same trade,industry, line of business or profession, or have a principal placeof business within a region that does not exceed the boundaries ofthe same state or metropolitan area. The association must also haveat least one substantial business purpose unrelated to theprovision of health coverage or benefits, even if the healthcoverage is the primary purpose of the association.

The control test requires that the functions and activities ofthe association must be controlled by its employer members, ratherthan an outside entity. Electing a board of directors made up ofassociation members would be sufficient.

All AHPs will be considered a multiemployer welfare arrangement(MEWA), which have a high level of state and federal regulation. Anassociation wishing to offer a plan will have to have a fullunderstanding of the state regulations that will apply to theirplan and pay close attention to the politics in those states. Forinstance, in late July, 12 attorneys general filed lawsuits tochallenge the new regulations. In the samevein, New Jersey's individual mandate will not accept many AHPplans as qualifying as minimum essential coverage. On the oppositeside of the issue, Oklahoma has indicated its enthusiasm for AHPs.For AHPs that span multiple states, they will need to understandwhich state regulations apply to them. That answer will hinge onthe specific plan design and the states it touches.

MEWAs are generally subjected to the same requirements ascommercial insurance companies, and states can regulate reserveestablishments, contribution levels, and more. Associations willneed to become well versed in the applicable state and federalrequirements and will have to comply with related federalregulatory filings, such as the M-1 filing relating to MEWAs andForm 5500. Associations with self-funded health plans will alsohave to wait for guidance from the Internal Revenue Service (IRS)on how ACA-related filing under sections 6055 and 6056 will behandled – and then be prepared to ensure participants receive theappropriate forms!

Associations will also have to wait and see if any insurancecarriers choose to offer plans in the AHP space. The firstopportunity to offer an AHP under the regulations is September 1,2018, when any association meeting the commonality of interest andemployer control tests can offer a fully insured AHP. The abilityto offer a plan in the fall of 2018 will be completely dependent onwilling carriers to enter into the market.

Associations can begin offering new self-funded plans under the new regulations onApril 1, 2019. However, associations that do not have significantdata regarding claims experience should be cautious about creatinga new self-funded group, which could prove to be financiallyrisky.

Associations will also need to have a full understanding of theAHP non-discrimination requirements, which will prohibit groupsfrom restricting membership in the association based on a healthfactor. Health factors are health status, medical condition, claimsexperience, receipt of health care, medical history, geneticinformation, evidence of insurability, and disability. For example,an association health plan could not exclude tobacco users from theplan.

Associations wishing to offer a health plan to its membersshould be working now to understand what the carriers in theirstate are planning on doing going forward. From there, they need toengage with their state insurance department to understand theregulations that will apply to them at a state level. Havingexperienced benefits counsel as part of the team will also becritical to ensure success meeting the numerous regulatorycompliance burdens.

Danielle Capilla, J.D.,([email protected]) is director ofcompliance, employee benefits for Alera Group, anational employee benefits, property and casualty, risk managementand wealth management firm.