The Insurance Commissioner’s newly revised rules governing association health plans once again alter the landscape for small employers. Hopefully, the rules last long enough for small employers to make a firm decision when renewing coverage in 2014.

Health plan markets have returned to the Wild, Wild West and the regulatory sheriff hasn’t stepped into the street to confront deceptive sales. If you’re a small employer and you receive an offer from an association or similar member organization claiming that your small group health plan will be treated as a large group plan, ask some questions now to avoid liabilities later.

Small group health plans must meet standards different from large group plans. State and federal law require health plans to include the benefits and pricing for the market segment to which the employer belongs. Employees not provided the right benefits at the right price can cause problems for employers, especially when employees contribute to plan premiums.

Some associations claiming to offer large group plans to small employers do not satisfy legal requirements for large groups. A few associations can and have met these requirements. Employers need to sort out the legal ones from the false ones. Under the new rules, insurers must conduct a review of an association before offering to sell them a large group plan.

• An insurer cannot offer a large group plan to an association unless the association satisfies federal ERISA standards for treatment as a single, large employer plan.

• An insurer must make a “good faith” effort to verify the association’s compliance with federal law before filing large group health plan rates and forms with the Insurance Commissioner for review.

• An insurer must keep a record of the documents it relied upon in verifying the association’s compliance with federal law.

After review, the insurer must include the following documents in its health plan filing with the Insurance Commissioner:

• A copy of the association bylaws,

• A copy of the trust agreement or other organizational document which shows the purpose of the association and who governs the association,

• A statement of the association’s history,

• A copy of the occupational categories/ industry classifications comprising the employers in the association, and

• An advisory opinion from the Federal Department of Labor demonstrating the group is qualified to purchase association coverage or in absence of a Federal Department of Labor opinion,

An opinion from an attorney explaining how and why the association qualifies as a true employer under 29 U.S.C. § 1002(5) of the Employee Retirement Income Security Act (ERISA) of 1974.

Employers should review these association documents. Even if an employer believes the association plan is a legitimate large group plan, the employer should review the documents because the employer must agree to the terms and conditions contained in these documents.

Make sure you know who you are doing business with and make sure the offer is legal.

 

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