The NAIC has circulated a revised Small Group Market Health Insurance Coverage Model Act with provisions narrowly defining “bona fide associations.” The NAIC should avoid additional, unnecessary deviation from federal standards. The proposed definition serves no useful purpose other than to insult those who did not go to college.

The proposed NAIC draft defines “bona fide” associations to exclude those not comprised of people who belong to a “profession that requires a significant amount of education.” When did that factor become an acceptable insurance regulatory standard for measuring the legitimacy of an organization and its provision of insurance to its members?

Over the decades, Washington associations have steadily increased their health insurance market share. According to a  2011 study by Mathematica Policy Research mandated by the Legislature, association plans covered 479,000 people in Washington accounting for 35% of the total employer group market in 2010. Association plans comprised nearly half of the small group market in 2010. Unlike other states experience, the association plan market in Washington is robust, diverse, and substantial. The Washington Education Association insured by Premera Blue Cross of Washington covered more than 119,000 lives in 2010. The second largest group was the Master Builders Association followed by over thirty other diverse organizations including the SEIU Healthcare Trust Plan, the Washington Farm Bureau, the Machinists, and Washington Technology Industry Association.

Given Washington’s long and successful experience with association health plans, what harm does the NAIC seek to remedy in recommending that states restrict “bona fide” associations to those “serving a single profession that requires a significant amount of education, training or experience or a license or certificate from a state authority to practice that profession?”  What motivates the NAIC to conclude that ordinary men and women running small businesses are not educated enough or professional enough to create and maintain a “bona fide” association? More importantly, how does the NAIC effort help clear the muddy stew of state and federal laws governing employer association plans?

You will not find as a factor in the Department of Labor judgment for determining whether a plan is “bona fide”, the characterization of the association as serving “a single profession that requires a significant amount of education.” Nor will you find many of the other standards included in the proposed draft. Those standards are designed to serve a different purpose. Instead, ERISA explicitly permits “association plans” to qualify as a single employer plan.

ERISA does not limit associations of employers to the narrow considerations of the NAIC draft despite the regrettable tendency of policymakers to use HIPAA and the Affordable Care Act definitions of “bona fide association” interchangeably with the ERISA standard. To be precise, ERISA permits a new association of employers formed tomorrow. Yet, most people presume that the narrower, specific purpose definitions like those used under HIPAA will govern the “bona fide” issue for ERISA.

The NAIC draft creates more friction between ERISA’s standard of a “bona fide” association and health care reform. Weirdly, the NAIC draft sets minimum numbers of participants in undefined geographic areas (i.e. 200 “local” members) that appear nowhere else in state or federal law governing these multiple employer welfare arrangements. Presumably, a “bona fide” association of small employers could create and offer a health plan once membership reaches the correct regulatory level.

The growing number of “bona fide association” standards in state and federal law has only served to create greater confusion. The NAIC effort to define “bona fide” associations is largely wasted. Federal law will determine whether an association plan is either in the small or large group market. Federal regulations and guidance under health care reform provide standards for issuance and non-renewal of coverage to “bona fide” associations in the small group market.

The NAIC’s ongoing effort to bless and encourage conflicting state rules in an already complex health insurance regulatory environment will help no one. If the NAIC needs a definition, copy the federal one and track its evolution. Why gratuitously insult farmers, ranchers, builders, and other “non-professional,” unlicensed employees instead?

Here’s some wisdom from a grizzled man who never took me hunting again, “If you want to kill something, just kill it and stop messin’ around.” So if the Insurance Commissioners want to kill association plans, just kill them and stop messing around. You’re not fooling anybody.


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