The Labor Department’s Employee Benefits Security Administration (EBSA) has proposed a rulemaking that it says would expand opportunities to offer employment-based health insurance to small businesses through small business health plans, also known as "association health plans." The 83-page Proposed rule, would accomplish this goal by modifying the definition of "employer" under Title I of ERISA, among other things (Proposed rule, 83 FR 614, January 5, 2018).
Associations treated as employer sponsors. The Proposed rule would broaden the criteria under ERISA Section 3(5) for determining when employers are permitted to join together in an employer group or association that is treated as the "employer" sponsor of a single multiple-employer "employee welfare benefit plan" and "group health plan" as defined in Title I of ERISA. By treating the association itself as the employer sponsor of a single plan, the Proposed rule is expected to facilitate the adoption and administration of such arrangements.
Definition of ‘employer’ modified. The proposal would also modify the definition of "employer," in part, by creating what EBSA said is a more flexible "commonality of interest" test for the employer members than the Labor Department has adopted in subregulatory interpretive rulings under ERISA section 3(5). The Proposed rule would continue to distinguish employment-based plans—the focal point of Title I of ERISA—from mere commercial insurance programs and administrative service arrangements marketed to employers.
Working owners as employers and employees. In addition, under the proposal, the working owners of an incorporated or unincorporated trade or business, including partners in a partnership, would be able to elect to act as employers for purposes of participating in an employer group or association sponsoring a health plan, and to be treated as employees with respect to a trade, business, or partnership for purposes of being covered by the employer group’s or association’s health plan.
Expanding accesses. EBSA said that the goal of its Proposed rule is to expand access to affordable health coverage, particularly among small employers and self-employed persons, by "removing undue restrictions on the establishment and maintenance of association health plans under ERISA." The proposal would impact association health plans, health coverage under these health plans, groups and associations of employers sponsoring such plans, participants and beneficiaries with health coverage under these plans, health insurance issuers, and purchasers of health insurance not purchased through association health plans.
In a press release, EBSA observed that up to 11 million Americans working for small businesses/sole proprietors and their families lack employer-sponsored insurance. These 11 million Americans could find coverage under the Proposed rule. Many small employers struggle to offer insurance because currently, it’s too expensive and cumbersome, according to EBSA. These employees and their families would have an additional alternative through small business health plans (association health plans), which would close the gap of uninsured without eliminating options available in the healthcare marketplace.
Among other things, EBSA underscored that the proposed rule would allow employers to join together as a single group to purchase insurance in the large group market. By joining together, employers may be able to reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.
Protections. EBSA also stressed that the Proposed rule includes protections for individuals. Small business health plans (association health plans) would not be able to charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors. EBSA said that it would closely monitor these plans to protect consumers.
The move by the Trump Administration is generally seen a move that could weaken the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) insurance marketplaces. According to Kaiser Health News, "some insurers fear that associations would peel off healthier and younger individuals and leave traditional insurance plans to cover sicker and older customers." ABC News characterizedthe plans as "health insurance policies that cost less but may not cover as much."
Comments. Comments on the proposed rule may be submitted during a 60-day period following publication of EBSA’s rulemaking notice in the Federal Register. Details for submitting comments are contained in the notice.
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