A recent Department of Labor (DOL) ruling titled "Definition of 'Employer' Under Section 3(5) of ERISA-Association Health Plans" has grabbed the attention of employers in Florida and across the nation.
By redefining the term "employer" under the Employee Retirement Income Security Act (ERISA), the ruling has opened up opportunities for small businesses and independent contractors to expand employee healthcare options. Here's what you need to know.
New Rules for Small Employers and Independent Contractors
Under the previous rules, smaller employers and independent contractors were regulated by the Affordable Care Act (ACA) and individual state laws. Under ACA, all policies purchased in the individual and small group markets were required to provide employees with a health care package that provided all 10 "essential health benefits. " Self-insured plans and those purchased in the large group market are exempt from this requirement.
The new ruling allows small employers and independent contractors to band together, forming associations that would allow them to participate in the large group market.
Changes to Association Health Plans
Association health plans (AHPs) existed prior to the ruling, but under stricter guidelines. The new rules allow employers to band together based on a "commonality of interest" test. There are several options for meeting this requirement including:
- Businesses falling into the same category of industry, trade, or profession, regardless of location across the U.S.
- Principal business locations in the same state or metropolitan area, even if the area stretches across multiple states
The new rules also allow sole proprietors to join AHPs and purchase coverage both for themselves and for their immediate families. AHPs that were already set up prior to this change can either continue operating as-is or expand their reach under the new rules. AHPs can now also choose to self-insure, as long as they meet state requirements.
Benefits of Large Group vs. Small Group Markets
Prior to the change, most states limited access to the large group market to businesses with over 50 employees, and a few required as many as 100 employees. The new AHPs allow small business owners to save money by taking advantage of economies of scale and gives them greater bargaining power. It also allows them to avoid restrictions that are currently only placed on small businesses.
Those opposed to the change argue that it is simply a way to get around ACA requirements and vow to fight the ruling. Proponents of the new rule hold that it levels the playing field between large and small companies, improving coverage options for employees of small businesses and giving them greater flexibility to choose a policy that fits their individual needs. It's estimated that the new rules will give close to 400,000 previously uninsured Americans access to healthcare options.
Compliance and Administrative Requirements
The new rules go into effect in phases, beginning in September of 2018. At this time, existing associations having the ability to put insurance plans into place. Associations won't be able to form new self-funded plans until April of 2019.
All AHPs must meet non-discrimination requirements which forbid them from keeping employers or individuals out of the plan or otherwise discriminating based on health factors. Any association considering self-insuring must also ensure it has enough resources to meet both State and Federal regulations. Employers should carefully consider the administrative costs and burdens of joining an association prior to making a change.
Regulations surrounding employer health care plans continue to evolve. There are several proposed Federal rules currently under review which would continue to loosen requirements. Some states, on the other hand, have vowed to fight these changes and tighten up regulations.