Association Health Plans

Go ahead, keep it up and see if I bite.

On Monday, the United States Department of Labor (DOL) issued an enforcement statement addressing the U.S. District Court decision invalidating DOL rules liberalizing bona fide AHP standards. Essentially, DOL will not bring an action against these newer AHPs until the end of the current plan year.

“DOL will not pursue enforcement actions against parties for potential violations stemming from actions taken before the district court’s decision in good faith reliance on the AHP rule’s validity, as long as parties meet their responsibilities to association members and their participants and beneficiaries to pay health benefit claims as promised. Nor will the Department take action against existing AHPs for continuing to provide benefits to members who enrolled in good faith reliance on the AHP rule’s validity before the district court’s order, through the remainder of the applicable plan year or contract term.”

DOL also issued a Q & A in response to the court decision to advise AHP plan participants about their benefits under the now unauthorized AHPs. While DOL expresses its disagreement with the court decision, DOL acknowledges that the court decision “does not diminish state oversight of AHPs under state insurance laws and regulations.” Naturally, Washington State allowed its emergency rules establishing the approval process for these liberalized AHPs to expire (emergency rules are valid for 120 days and must be replaced by permanent rules).

Although the DOL enforcement statement largely repeats the statement released by DOL’s Employee Benefits Security Administration (EBSA), the EBSA statement includes footnotes identifying DOL’s reliance upon the Center for Consumer Information & Insurance Oversight (CCIIO) bulletins that explain employee rights to continue coverage under AHP plans. According to DOL, AHP plan participants facing the demise of an AHP have these options:

“(HHS) has advised the Department that employer members of an insured AHP have an independent right under the guaranteed renewability provision of the Public Health Service Act (PHS Act) to continue insurance coverage (including maintaining all out-of-pocket accumulators for employees and their families) through the end of the applicable plan year, unless an exception applies. That is, if an AHP purchased a large group insurance policy, then the insurer must generally continue the coverage in force for each participating employer and its covered employees at that employer’s option through the end of the plan year.

At the end of the plan year, the issuer would only be able to renew the coverage for an employer member of an AHP formed pursuant to the Department’s final rule if the coverage complies with the relevant market requirements for that employer’s size (such as, for insurance sold to small employers, the essential health benefits requirements and premium rating rules). An insurer can satisfy the requirement to continue the coverage in force by continuing coverage for each employer-member of the association that chooses to continue coverage, either through the master policy with the association or through separate contracts with each employer-member on an outside-the-association basis.” [EBSA Statement]

DOL notes that HHS will follow the same non-enforcement policies until the end of a non-compliant AHP plan year. Both agencies will work with states to ensure transition and HHS will not consider states to be out of compliance with federal laws during the interim period.

However, DOL notes the biggest problem with the termination of these liberalized AHPs:

“If a small employer or sole proprietor voluntarily drops coverage offered by or through the association, the employer or sole proprietor may have to wait to obtain new coverage in the small group or individual market, as applicable, which can create gaps in coverage.”

The agency observes in a footnote the practical implications.

“While there is generally year-round enrollment in the group market, small employers that cannot meet an issuer’s minimum participation or contribution rules, as allowed under applicable state law, may be restricted to an annual enrollment period from November 15 to December 15, with coverage effective January 1. For working owners considering switching to individual market coverage, the annual open enrollment period is November 1 to December 15, with coverage effective January 1, unless an individual qualifies to enroll through a special enrollment period. Short-term, limited duration insurance coverage may allow some individuals to bridge these gaps.”

Health plans have developed the volatility typical of penny stocks. Employer confusion continues to grow. I will leave for another day the burgeoning “faith-based, not a health plan” alternatives being pitched to employers and insurance producers as a solution to market confusion.

Yikes. Makes you want to bite someone.