The Department of Labor (DOL) issued a proposed rule to expand the usefulness and availability of “association health plans” by reducing the restrictions on the types of employers that may join together to form “associations” for the purpose of offering health care coverage to employees. More specifically, the Proposed Rule would make it easier for a group or association of employers to be considered an “employer” sponsoring a multiple employer health plan (a multiple employer welfare arrangement, or MEWA) that qualifies as a single ERISA-covered plan. Association health plans have existed for many years, but under the existing rules, many employers participating in the plans were unable to take advantage of the size of the combined group of covered employees.
Through the Proposed Rule, the DOL intends to allow employers to join together to “reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.” It is anticipated that small employers and self-employed individuals will be particularly interested in joining existing or newly-formed associations to take advantage of their combined status as a “large group” health plan. While the DOL has focused its attention on the rule’s impact on small businesses, large employers will also be able to join these associations, which could provide them with even greater bargaining power and economies of scale. To accomplish these goals, the Proposed Rule provides for the following:
- The rule provides flexibility for different employers to participate in an association health plan, allowing employers to join together for the purpose of offering health coverage if they are either (1) in the same trade, industry, line of business, or profession; or (2) have a principal place of business in the same geographical area (such as a state or metropolitan area, even if the metropolitan area crosses state lines);
- Associations are required to have a formal organizational structure that allows for the association’s members (e., the employers) to control the association;
- Health coverage under the plan would only be available for employees and former employees of the association members, but for these purposes working owners may be treated as “employees” of their companies; and
- The association health plans must meet certain nondiscrimination requirements that prevent an association from denying membership based on health factors or charging different employer members higher premiums based on the health status of their employees.
The Proposed Rule is currently open for comments, and there may be revisions when the rule is finalized. While these revisions may impact some of the nondiscrimination or other compliance requirements relating to association health plans, it seems that the administration has set the expansion of eligibility for association health plans as a top priority.
If the rule is finalized, it would likely create additional opportunities for benefits professionals, including brokers and consultants, with their existing clients, as well as within a new segment of the market. Association health plans should allow benefits professionals to deliver value to their clients by connecting them with additional cost-effective solutions through association health plans. Benefits professionals are also likely to be an important source of information and guidance for employers looking to form associations and association health plans. Additionally, benefits professionals should look for opportunities to work with existing and newly-formed associations to assist with plan design and creation. By working with employers and the associations, savvy benefits professionals who are willing to adjust to these changes and to work through the “red tape” that will likely be involved can serve as the critical link between employers and association health plans.
For more information about anything discussed in this Client Alert, please contact a member of the Maynard Nexsen Employee Benefits & Executive Compensation practice group.
Matthew advises employers and benefits professionals across the country in matters related to employee benefits and executive compensation. He has experience representing employers in defense of audits, investigations, and ...
Seth is an Associate in the Employee Benefits & Executive Compensation practice at Maynard. Seth advises clients in connection with qualified and non-qualified retirement plans, executive and equity compensation arrangements ...
Greg is the Chairman of the Firm and a member of the Corporate and Business Transactions Practice. For more than 30 years, Greg has advised clients through all types of complex business matters and strategic transactions. The clients ...
Lauren assists hospitals, physician groups, durable medical equipment suppliers, pharmacies, and other types of health care providers and suppliers nationally with a wide range of health care regulatory matters that both shape ...
John is Chair of the Corporate and Business Transactions Practice. He also serves as Chair of the Firm’s Charitable Foundation.
Representing both public and private companies, John focuses his practice primarily in the areas of ...
Jessica is a Shareholder in the Employee Benefits & Executive Compensation practice at Maynard Nexsen.
Her practice is dedicated to representing employers in the design, implementation, administration, and correction of ...
Tim is the Chair of Maynard Nexsen’s Public Company Advisory Group. He has more than twenty years of experience advising companies, board of directors, and executives on securities, transactional, corporate finance, corporate ...
Jimmy counsels clients on all aspects of employee benefits compliance related to qualified plans, including pension (both traditional and cash balance), 401(k) plans, ESOPs (leveraged and non-leveraged), 403(b) plans ...
Claire is an Associate in Maynard Nexsen’s Employee Benefits & Executive Compensation Practice Group.
With significant experience representing employers and management across the industry spectrum in a wide range of ...
Virginia is a Shareholder in the Employee Benefits & Executive Compensation practice at Maynard.
Virginia counsels public and private companies in all aspects of employee benefits and executive compensation, including the ...
Frances King Quick serves employers in the establishment and maintenance of qualified and nonqualified retirement plans and welfare benefit plans, including ESOP transactions, IRAs, plan qualification, plan terminations ...
Matt’s national practice and unique talent stack encompass a broad skill set in the laws affecting the workplace, including labor and union relations, employment litigation, employee benefits, trade secrets and restrictive ...
Beth is Chair of Maynard's Employee Benefits & Executive Compensation team. She is also a member of the Firm's Executive Committee and Board of Directors.
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