On June 19, 2018, the U.S. Department of Labor (DOL) issued an updated definition of “Employer” under Section 3(5) of ERISA (Association Health Plans), which was finalized in the final rule on July 10th, 2018.
The changes to the rule allow small employers who would not otherwise be able to qualify to join together and collectively have a vehicle, the Association Health Plan (AHP), to offer that coverage to their employees. These employers must simply meet the new “commonality of interest” test.. A benefit of doing so, among other things, is that such employers (and sole proprietors) will no longer have to meet the insurance requirements of the ACA for small group insurance offerings.
Employers in such an Association must either be in the same “trade, industry, line of business or profession” or have a principal place of business in the same region, that does not exceed the boundaries of a single State or metropolitan area, even if the metropolitan area includes more than one State. The DOL also notes that in promulgating this new standard, the terms used are to be construed broadly to expand coverage, and it will consider the use of any “generally-accepted” classification system.
Under the Final Rule, it will also be sufficient if there the association of employers has “one substantial purpose unrelated to the provision of benefits”, even if the group or organization’s principal purpose is the provision of insurance benefits and the preamble notes that such a purpose might be sufficient if the bona fide group or association, in addition to its insuring activity, convened conferences or offered classes or education materials on “business issues of interest” to AHP members, or served as a standard setting organization, or engaged in public relations activities, such as advertising, education or publishing on business issues of interest to association members. The only limitation is that the activity be “substantial enough that the association would be a viable entity even in the absence of acting as a sponsor of an AHP.”
The applicability date for fully insured AHPs is set for September 1, 2018. For any employee benefit welfare plan that is not insured, the applicability date is January 1, 2019.
What this expansion ultimately means is that, while the DOL has sanctioned a very broad expansion under ERISA and created significant opportunities, it will also continue to look to the States, now in an even more enhanced role, for effective oversight, so quality working relationships with those State regulators will be more important than ever for those plans seeking to use the expanded opportunities.
