On January 4, the U.S. Department of Labor issued a proposed rule that would allow small employers and sole proprietors to band together to purchase large group health plans that would be exempt from many of the requirements under the Affordable Care Act. The proposed AHP rule carries out President Trump's October executive order to allow more employers to join AHPs.
The proposed rule will have a 60-day comment period and will become final sometime after comments are considered.
Specifically, the regulation would allow employers to form associations for the express purpose of offering health coverage if they either are: (1) in the same trade, industry, line of business, or profession (no matter what state); or (2) have a principal place of business within the same state or the same metropolitan area (even if the metropolitan area includes more than one state).
AHPs would not be subject to the "look-through" doctrine (where each member of the association is evaluated to determine if it is eligible for small or large group coverage). Instead, because an AHP under the proposed rule would constitute a single plan, large or small group status would be determined by reference to the number of employees in the entire AHP. Significantly, the proposed rule would also allow certain sole proprietors and other self-employed individuals to participate in these arrangements.
While the President and other proponents argue that these actions will lower premiums and expand coverage, numerous groups (including insurers, state insurance commissioners, and the American Association of Actuaries) have opposed expansion of AHPs for decades because it would destabilize insurance markets as groups with younger, healthier employees choose the cheaper plans, leaving people with higher health care needs in the more comprehensive plans.
New York impact not yet clear: It's not clear yet how the proposed rule would affect New York's insurance market. Association plans are allowed here, but small groups in the association must be offered ACA-compliant small group plans, and sole proprietors must purchase individual policies. While the proposed rule doesn't appear to preempt state law, more analysis is needed to understand exactly how the rule would affect the state.
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