On January 5th, the Department of Labor proposed significant changes that could affect the association health plans that many companies use to cover their employees. If enacted, these proposals could dramatically shape the way businesses pay for and provide health care coverage. They should provide more flexibility for businesses, especially small businesses, and the self-employed, to get the healthcare coverage they need. However, there are concerns that these changes could be detrimental to existing health care plans that currently cover many consumers. Let’s take a look at the most substantial changes that have been proposed, and how they may affect your business.
More Employer Latitude
Current Federal guidelines limit how businesses band together to purchase healthcare coverage, and make the process of establishing association health plans cumbersome. The proposed Department of Labor changes would provide businesses considerably more latitude. Under DOL’s proposals:
- Employer would be able to band together for the single purpose of obtaining health coverage.
- Employers in the association can either (1) be in the same trade, industry, line of business, or profession; or (2) have a principal place of business within a region that does not exceed the boundaries of the same State or the same metropllitan area (even if the metropolitan area includes more than one State).
The proposed regulations would also place some constraints on the structures of these new association health plans:
- The group or association forming the health plan would have to establish an organizational and governing structure. The group or association’s health plan would have to be functionally controlled by its employer members.
- Group or association plan coverage would be limited to employees or former employees (and family/beneficiaries of those employees and former employees) of employer members, and treatment of working owners.
Addressing the Self-Employed
The proposed rule changes are also good news for the self-employed. Recognizing the increasing number of Americans who freelance, work as contractors, sole proprietors or are otherwise self-employed, the proposed changes would allow people in the gig economy to join or establish association health plans as well. The proposals would place some restrictions on the self-employed before enabling them to obtain health coverage under these plans:
- The self-employed individual must earn income from the same trade or business. Passive owners are not eligible.
- The self-employed individual must either (1) work an average of 30 hours each week, or 120 hours per month of personal services to the trade or business; or (2) have earned self-employment income from the trade or business that matches the cost of coverage for the proposed association’s health plan.
- The opportunity to establish or join association health plans would only apply to self-employed people who are otherwise not eligible for coverage under other group plans, or their spouse’s healthcare plan.
Despite the caveats, these proposed changes could make it easier for the self-employed to get the healthcare coverage they need.
Employee Protections Remain in Place
While these proposals would dramatically alter the way small businesses get healthcare coverage, the protections employees enjoy under the rules would not change. Association health plans will not be able to discriminate, or otherwise restrict coverage, on any individual based on any health factor. Premiums in these plans cannot be set or changed based on any individual’s health issues, either. Thus, while the Department of Labor’s proposals would create more flexibility for small businesses, they would not weaken any of the safeguards currently in place to protect consumers.
Potential Impact and Next Steps
The goal of DOL’s proposed regulations is to expand access to affordable health coverage, especially among small employers and self-employed individuals, by removing undue restrictions on the establishment and maintenance of association health plans under the Employee Retirement Income Security Act (ERISA). The Department of Labor appears poised to monitor implementation of these proposed changes, and ensure that the provisions protecting workers will be enforced.
Some health insurance organizations, such as the nonprofit Commonwealth Fund, believe DOL’s proposals are problematic. They are concerned that the flexibility and affordability of the new association health plans will attract more workers, particular young ones, to enroll in them, and threaten existing health care plans; this could lead to higher premiums for the people covered under those plans, or even threaten the existing plans’ overall viability. Other healthcare experts also question whether or not the States, which carry out much of the oversight and enforcement of health care regulations, will be able to effectively monitor implementation of these new rules as well.
The Department of Labor has requested feedback on the proposed rule changes, and will accept comments on them until March 6th. Some healthcare and regulatory experts expect there will be further changes to DOL’s proposal, based on analysis and feedback from consumers, business associations, and healthcare advocacy groups. For employers who may be interested in association health plans should continue to watch these proposed rules and any corresponding State law changes.
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