On June 19th 2018, the Department of Labor (DOL) issued a final rule on Association Health Plans (AHPs) – associations created by smaller employers in part to purchase health coverage at a reduced rate.
This rule will expand the availability of large employer health plans to small business owners, employees of small businesses, and family members of working owners/employees. Existing AHPs will be allowed to continue operation under the previous regulations.
AHPs are not new, but small groups and individuals are now empowered to form Association Health Plans based on expanded criteria. For example, these health plans may form based on geographic locale, such as employers sharing a common state, city, county, or a metropolitan area across state lines. This is in addition to the formation of industry AHPs, which was an option previously.
Working business owners that do not have any employees can also now join an AHP. This includes sole proprietors.
The final rule still requires associations to have a substantial purpose beyond providing healthcare coverage.
All associations – new or existing – are expected to be able to begin creating fully-insured Association Health Plans on September 1, 2018.
The Congressional Budget Office has estimated that four million American will join an AHP by 2023 – including 400,000 that would otherwise lack insurance.
Under the final rule, AHPs have the potential to provide more small employers with increased coverage options at an affordable price with reduced administrative costs and regulatory complexity.
As a result, the rule will expand the accessibility of affordable consumer-directed health plan (CDHP) coverage to small employers and should encourage those small employers to offer Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), or Flexible Spending Accounts (FSAs) to complement that coverage.