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Feds may let more employers band together to provide employee health insurance

Alison M. Howard, attorney in Crowe & Dunlevy’s Employee Benefits & ERISA Practice Group

Feds may let more employers band together to provide employee health insurance

Q: Why do small employers struggle to offer health benefits?

A: Many small employers find it cost-prohibitive to offer health benefits in the current market, leaving upwards of 11 million small business employees without health coverage. Small employers lack the purchasing power of large employers, which can spread risk and administrative cost over a bigger pool. Small employer plans are also subject to benefit mandates and other restrictions under the Affordable Care Act (ACA) not applicable to larger plans, including the requirement that small group insured plans provide a richer package of benefits called “essential health benefits.” These requirements have contributed to a significant increase in small group premiums. Further, for small employers who don't have a large employee base over which to spread risk, self-funding may not be a less costly alternative to offering an ACA-compliant insured plan.

Q: What is an association health plan and how might it benefit small employers?

A: An Association Health Plan (AHP) allows employers to band together to provide health coverage to employees as a single employer unit. Specifically, an AHP is an “employee benefit plan” established or maintained by a “group or association” of employers deemed to be one “employer” within the meaning of the Employee Retirement Income Security Act. An AHP may enable small employers to offer competitive and affordable health benefits, especially now that the U.S. Department of Labor has proposed relaxing the requirements to form an AHP. Small employers who satisfy the criteria to form an AHP can join together as one group to obtain the advantages of a large employer, including the ability to spread risk and cost so as to achieve economies of scale, exercise greater purchasing power and make self-funding a viable option.

Q: What does the federal Department of Labor (DOL)'s proposed rule change about association health plans?

A: Under the current criteria, not many employer associations qualify as AHPs. Most restrictively, employers cannot form an AHP solely for the purpose of offering health benefits and must have a tight economic or representational “commonality of interest.” In response to an executive order, the DOL has proposed changes that purport to allow more employers to form AHPs, in particular by dispensing with the requirement that the employer association have a purpose other than offering health coverage and by expanding the permissible commonality of interest. The proposed rule would allow employers to join together for the exclusive purpose of offering health benefits. And the rule would more flexibly allow employers to associate through the common interest of being in the same trade/industry or geographic area. The DOL expects to finalize the rule by this summer.

PAULA BURKES, BUSINESS WRITER

Paula Burkes

A 1981 journalism graduate of Oklahoma State University, Paula Burkes has more than 30 years experience writing and editing award-winning material for newspapers and healthcare, educational and... Read more ›

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