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The “New” AHPs: Hot or Not?

President Trump is expanding affordable health coverage options for America’s small businesses and their employees. Many of our laws make healthcare coverage more expensive for small businesses than large companies. Association Health Plans are about more choice, more access, and more coverage.”  — U.S. Secretary of Labor Alexander Acosta

According to the U.S. Department of Labor’s website, on July 19, 2018, the DOL expanded access to affordable health coverage options for America’s small businesses and their employees through Association Health Plans (“AHP”) as a result of President Donald Trump’s Executive Order  “Promoting Healthcare Choice and Competition Across the United States”[1].  Bona Fide Association Plans have been in existence for quite some time but these plans require that the plan is maintained by a “bona fide” employer association that demonstrates the requisite “commonality of interest” to be treated as a single plan.  This standard is difficult to satisfy because of complex requirements under both federal and state law including, but not limited to, ERISA/DOL, Tax Code/IRS. PHSA/HHS and state insurance departments/laws.

Traditional Bona Fide Association Plans benefit small employers (who meet the tough standards of commonality of interest) because the multiple employers can band all participating employees together in one plan and avoid many of the small employer rules both in ACA and applicable to group medical coverage in general.  But again, the standard to meet is steep and few AHPs make it.

The new AHPs dispose of the “commonality of interest” standards and significantly relax the longtime standards for determining whether a sufficiently close economic or representational relationship exists among the employers and employees participating in the plan.  In other words, these new AHPs work by allowing small businesses, including self-employed workers, to band together by geography or industry alone to obtain healthcare coverage as if they were a single large employer.  But, there is always a trade off (AKA catch).  Here the catch is that these AHPs may not charge employers different premiums based on the health status of their employees.  This fact coupled with the lessened restrictions of the coverages in the plan cause some policy experts to be concerned that the medical plan may not be as robust and worthwhile as small group/individual plans which is sure to be less appealing to persons with significant health conditions.   However, most agree that young and healthy participants are likely to see lower-cost plans, at least for the short term.

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