Association Health Plans

The Washington Insurance Commissioner (OIC) adopted emergency rules governing association health plans (AHPs) created under the recently liberalized Department of Labor (DOL) standards for bona fide AHPs. The liberalized standards allow loosely affiliated small businesses to become eligible for treatment as a large group plan under ERISA.

Under the DOL regulations which took effect for new, fully insured AHPs on September 1, 2018 and takes effect for new, self-insured AHPs on April 1, 2019, associations can choose to form a bona fide, large group association health plan under either the older, strict standards or the liberalized 2018 standards. The OIC has designated these options as “Pathway 1” for older, strict standard AHPs and “Pathway 2” for AHPs formed under the 2018 standards. OIC issued a memo outlining these general designations in September.

OIC rules for Pathway 1 AHPs are integrated in current Sub-chapter B “Plan Management” rules of Chapter 284-43 of the Washington Administrative Code (WAC) (WAC 284-43-0310 and WAC 284-43-0330). The new OIC rules for Pathway 2 AHPs will be codified as a new sub-chapter in Washington Administrative Code (WAC) as WAC 284-9000 – 9020. The agency has also updated its instructions for filing health plan rates and forms to incorporate these two versions of AHPs. The revised form filing instructions address both types of association health plans in sections I – G and H of the instructions. For comparison, here are the filing instructions from earlier in 2018. Requirements for “old school” AHPs remain largely unchanged.

The rate filing instructions have also been updated. For comparison, here are the rate filing instructions for earlier in 2018. Filings need to be labeled as either Pathway 1 or 2 and include the information described in section II.C.2 of the instructions. The new filing standards for Pathway 2 AHPs require more detailed information than that required for Pathway 1 AHPs. For example, filings must include the AHPs most recent DOL M-1 filing (WAC 284-43-901-930) and:

[Pathway 2 rate filings must include] A certification by a member of the American Academy of Actuaries, or other person approved by the commissioner, that the development of the rating factors are based on applicable actuarial standard of practices for rating a single employer, and the rating criteria in connection with this association health plan meet the requirements of nondiscrimination provisions under 29 C.F.R. 2510.3-5 (d) and 2590.702(a).

WAC 284-43-9020(4)(f)

Existing Pathway 1 AHPs remain wary of changes to existing state regulatory standards as the OIC implements a process for approving Pathway 2 AHPs. For Pathway 1 AHPs operating as associations with multiple sub-trusts, concern exists that OIC will attempt to impose Pathway 2 standards on associations of businesses with widely divergent professions and industries.

It’s still too early and politically volatile to determine the long-term viability of “new school” AHPs given the rapidly changing legal environment in the other Washington. Insurance markets now depend upon daily litigation updates from federal rule challenges to questions about the constitutionality of health care reforms.

Oy vey…