Association Health PlansInsurance Regulation

Catastrophe reveals character and exposes fraud. From one shut-in to another, I’ve quickly learned from the flood of calls and “chats” that some clients rush to the aid of customers and others rush to the bunkers. A reckoning will come later when I evaluate my own contributions and assess the decent use of my time and attentions. For now, I am mostly pleased by the intensity and commitment many association plan trustees have shown in meeting the needs of employers in this time of crisis. What follows are the kinds of questions they have been asking and the answers I have been able to find. As I learn more of value, I will share it here.

I posed the questions below to the Washington Office of the Insurance Commissioner (OIC). Both the questions and answers are provided in unedited form received from the OIC on March 31st.

“As a general matter, the OIC is looking to provide flexibility to carriers extending or expanding coverage, especially health plans, to enrollees negatively impacted by COVID-19. However, as a regulator, we also have to be sure these changes are implemented fairly and not in a subjective or discriminatory manner. To balance these interests, we are asking all health carriers to file the voluntary changes they would like to make to their health plans with the OIC so that we can be confident these changes are uniform and fair for enrollees. More specific answers to your questions are below.”  

Question 1:         The trust only accepts cash or check for premium payment. Participating employers facing cash flow issues want to pay with credit card for employees but bank would impose transaction fee that would reduce premium payment. May the trust require addition of transaction fee to employer payment to cover transaction fee? Could the Trust consider the transaction fee payment an administrative fee approved by trustees?

                                 Response: For purposes of state law, RCW 48.43.005(32) defines “premium” as all sums charged, received, or deposited by a health carrier as consideration for a health plan or the continuance of a health plan. Any assessment or any “membership,” “policy,” “contract,” “service,” or similar fee or charge made by a health carrier in consideration for a health plan is deemed part of the premium. . . . The OIC has previously determined that fees collected by an AHP for the purposes of providing health coverage to its members, including credit card fees, are included in the definition of premium, unless the contract explicitly excludes credit card fees.  If current rates do not address credit card fees, then the rates on file with the OIC would need to be modified in order for AHPs to collect this additional fee from their members.

In addition to state requirements, an AHP may need to consider whether the fees being imposed on members, such as credit card fees, are permissible as administrative fees under federal law.

Question 2:         A Trust has a modest liquid reserve of plan assets set aside for emergencies. May the Trust adopt a uniform, non-discriminatory policy to lower employer premiums for a short duration by contributing some reserve funds to premium payment without violating anti-rebate, illegal inducement or similar laws? 

                                Response: Inducement and rebating statutes contain prohibitions for insurers, insurance producers, and title agents. RCW 48.30.140 and 150. A trust is not subject to state inducement and rebating statutes unless they are using a licensed producer to facilitate members becoming part of the trust. Assuming neither a licensed producer, nor an authorized carrier is involved in the notification or administration of this distribution, this would not violate state law. 

However, in addition to state law requirements, an AHP may need to consider whether contributions from the trust assets to premium owed by participating employers is permissible under federal law.

Question 3:         May an employee who no longer qualifies as an eligible employee under plan documents due to Covid-19 work stoppages, continue to receive benefits under the plan as an eligible employee? If so, does the definition of eligible employee need to be modified in the plan documents and would this require an amendment to the form filing?

                                Response: If employee no longer qualifies as eligible employee under the plan documents, the carrier should not continue to issue plan benefits. The definition of eligible employee would need to be amended in the form filing to permit otherwise ineligible employees to participate. Any changes in definition will also need to comply with state and federal requirements for who qualifies as an employee.


I generally agree with these responses; but, AHP trusts must still determine where the boundary lies between ERISA and insurance regulation as noted in the OIC responses. For example, the first question notes the OIC’s view that all sums charged by a “health carrier” constitutes premium. However, not all sums charged by a trust constitute premiums. Depending upon the purpose, disclosure, and accounting for a fee, the sum may not even constitute a trust asset let alone a “premium” payment. A trust’s calculation and collection of administrative fees properly disclosed, held in trust, and spent accordingly may satisfy ERISA requirements irrespective of rules imposed upon insurers.

As the OIC response to question 3 should suggest to plan administrators, changes to plan administration should be memorialized in trustee resolutions, and appropriate amendments to plan documents even if insurance policies permit the adjustments proposed by the AHP. A plan should always document the purpose and permission of adjustments to plan administration.

As a final note as I chase my dog away to finish this paragraph, the mercy, generosity, and commitment to the well-being of others acquits itself against rules used to profit from misery or prevent relief in satisfaction of regimentation.

Stay well and don’t touch me.