DOL Twice Addresses Developments in Association Health Plans
The Department of Labor (DOL) recently issued a statement in response to a recent federal trial court decision vacating key provisions of the regulations for association health plans (AHPs).
The regulations expand the criteria for a group or association of employers to be considered an “employer” under ERISA, so that a health care plan sponsored by the group or association will be treated as a single ERISA plan. According to the U.S. District Court for the District Columbia, however, this expansion stretches the employer definition “beyond what the statute can bear.”
In its initial statement, the DOL indicated that it has appealed the ruling and set forth the interim approach it will take with existing AHPs. Later in May, the agency issued additional FAQs to further help employers affected by the court ruling.
The DOL’s initial statement provides that employers participating in existing insured AHPs can keep their current coverage in force until the end of the plan year or, if later, the contract term. The agency noted that the guaranteed-renewability rules provide AHP members with an independent right to continue existing insurance coverage.
Thus, organizations with large-employer coverage through an AHP can continue that coverage. Once the current year ends, however, coverage must comply with applicable requirements based on the employer’s size, such as the essential health benefits requirement for small employers under the Affordable Care Act.
Acknowledging that affected parties (including plans, employers and participants) face compliance issues separate from coverage concerns, the DOL states that it won’t take enforcement action for potential violations relating to actions taken before the court’s ruling — so long as parties meet their responsibilities to provide coverage as promised. Nor will it act against existing AHPs for continuing to provide coverage through the end of the applicable plan or contract year.
The statement specifies that the Department of Health and Human Services (HHS) has advised that it will follow a similar nonenforcement policy through the end of the applicable plan or contract year. Employers are cautioned to carefully consider their near-term options, because changes to coverage, such as dropping coverage voluntarily, could lead to coverage gaps.
Following up on its initial statement, the DOL issued additional guidance in the form of four FAQs in mid-May:
- Q/A-1 clarifies that pre-existing subregulatory guidance on the criteria for a group or association of employers to be considered an ERISA “employer” is unaffected by the court’s ruling. The FAQ refers to AHPs formed under pre-existing guidance as “Pathway 1 AHPs,” while those formed under the regulations are “Pathway 2 AHPs.” Pathway 1 AHPs may not allow participation by working owners or establish commonality among employers based solely on geography. (These are elements of Pathway 2 AHPs specifically vacated by the court.)
- Q/A-2 specifies that Pathway 2 AHPs may not market to or sign up new employer members, but existing employer members can continue to enroll new employees upon special enrollment events and when consistent with the plan’s eligibility terms.
- Q/A-3 confirms that DOL enforcement relief extends through the remainder of the plan or contract year that was in effect at the time of the court’s ruling. It also references the HHS’s corresponding enforcement policy, and notes that the agencies encourage states to adopt a similar approach.
- Q/A-4 refers Pathway 1 AHPs to existing advisory opinions for additional guidance on employer status for groups or associations. Explaining that advisory opinions aren’t required, this FAQ suggests that AHPs with a particular need have an informal phone call with Employee Benefits Security Administration (EBSA) specialists as an alternative (or precursor) to the potentially time-consuming advisory opinion process. Contact information is provided, along with other recommended resources.
The FAQs don’t provide instructions for finding relevant advisory opinions, but these are available through the EBSA advisory opinions webpage. Select “ERISA Sec. 3(5)” in the “Select a Reference Category” drop-down menu.
Monitor and interpret
The DOL’s guidance provides AHPs and participating employers breathing room to continue their coverage through the current year. And the compliance relief is helpful; for example, it appears that participating employers don’t need to file separate Forms 5500 if the AHP makes a timely and accurate filing.
But the future of AHPs under the regulations remains uncertain. Employers participating in these plans — particularly Pathway 2 AHPs — should work closely with their benefits advisors to monitor and interpret further developments.