UPDATE – APRIL 3, 2019
On March 28, 2019, the US District Court for the District of Columbia vacated the following provisions of the final rule and remanded the rule back
to the U.S. Department of Labor (DOL) to consider the effect of the rule’s severability clause on the remaining provisions:
- Bona fide group or association of employers, 29 CFR § 2510.3-5(b)
- Commonality of interest, 29 CFR § 2510.3-5(c)
- Definition of “Employer” under Section 3(5) of ERISA by 29 C.F.R. §§ 2510.3-5(b)–(c)
- Dual treatment of working owners as employers and employees, 29 CFR § 2510.3-5(e)
The U.S. DOL disagrees with the court’s decision and is considering options such as whether to appeal. If you have questions about existing benefits,
please contact your plan administrator. It remains to be determined how the court’s ruling will impact future enrollment as well as potential
modifications to existing AHP plans.
Association Health Plans FAQ
What is new with Association Health Plans (AHPs)?
- The U.S. DOL released a new rule on Association Health Plans in June 2018. The rule creates a new “pathway” for employers to form an
Association Health Plan offering more flexibility – state laws permitting - than previously existed. Association Health Plans are group health
plans that employer groups and associations offer to provide health coverage for employees.
Who is allowed to join to form an AHP?
- Corporations, partnerships, and limited liability companies (LLCs) can generally form an association to create an AHP.
What new options are created as a result of the new rule for AHPs?
- Under the new rule, association members do not need to be in the same business or industry but must meet new “commonality of interest” rules.
Association members must have at least one of the following in common:
- Trade, industry, line of business or profession;
- Principal place of business in the same state, city or county; or
- Principal place of business in the same metropolitan area (which could include more than one state)
- An association can now form with the provision of health care benefits to its members being the primary purpose for which an association is
formed. However, this cannot be the only purpose of the association. There still must be at least one substantial business purpose. A
substantial business purpose is considered to exist if the entity would be a viable association even in the absence of sponsoring a health plan.
- Associations can allow working owners to join them if state law permits.
When do AHPs become effective?
- The new rule has established three effective dates for AHPs:
- 9/1/2018 – Fully-insured plans
- 1/1/2019 – Existing self-funded plans
- 4/1/2019 – New self-funded plans
If the Idaho Department of Insurance (DOI) approves an AHP, will you allow them to be effective on 9/1/2018?
- The DOI anticipates that newly submitted, fully-insured AHPs can be made effective 9/1/2018 as long as the AHP fits within the criteria for
establishing a bona fide association as stated in the new U.S. DOL rule. We don’t anticipate the new rule will cause much change to the DOI’s
process of reviewing and approving fully-insured group health plans filed by insurance carriers. Please note the DOI will diligently review all
documents in an expeditious manner. However, depending on the number of submissions and completeness of submissions the time for approval will vary.
Since federal regulations state AHPs can be formed by non-industry specific AHPs, do you have any problem with a chamber of commerce creating an
AHP as done in other states?
- The DOI doesn’t anticipate problems with a chamber of commerce creating a fully-insured AHP as long as the association qualifies as a bona
fide association under the new U.S. DOL rule. The Rates and Forms Section of the DOI requires the insurer to provide copies of the association’s
bylaws and articles of incorporation as part of the review process. Under
Idaho Code § 41-2202(2), the association’s
organizational documents are reviewed to verify that the association “has been organized and is maintained in good faith for purposes other
than that of obtaining insurance.”
Will fully-insured AHPs be required to have a trust document and board of trustees to oversee the AHP?
- Organizational documents for a fully-insured AHP will be reviewed to check that the association is properly formed and maintains a board of
directors, but a trust document is not required under Idaho Code for fully-insured group health plans. However, if a fully-insured association
subsequently decides to become self-funded, the association would then need to execute and provide a trust document to the DOI and would need to
comply with the remaining requirements of
Title 41, Chapter 40, Idaho Code. Among those requirements,
a self-funded AHP must create a separate trust by executing a trust document and must form a separate board of trustees for the trust,
independent from the board of directors of the association. The AHP would become the sponsor of the new self-funded plan maintained by the trust.
What licenses are required to sell or assist with AHPs?
- In general, for fully-insured plans a producer or agent license with a disability or health line of authority would be required for an
insurance agency or individual to sell, solicit, or negotiate insurance with associations or AHPs. For self-funded, and fully-insured plans,
a Third Party Administrator (TPA) license would be required in addition to a producer license to perform certain functions. TPAs are required
to be licensed under Title 41, Chapter 9, Idaho Code if an
entity “directly or indirectly underwrites, collects charges or premiums from or adjusts or settles claims on residents of this state in
connection with life, annuity or health insurance coverage offered or provided by any insurer.”
- Any TPA, if other than the trustee of a self-funded AHP, must comply with the requirements for TPAs set forth in
Title 41, Chapter 9, Idaho Code including the requirement to
be registered with the DOI.
What are the requirements to create a fully-insured AHP?
- Carriers submitting AHPs must comply with all federal and Idaho requirements for the submission of group health insurance plans (see
Idaho Code § 41-1812 and
Idaho Code § 41-1813 for the filing requirements).
- For AHPs subject to Idaho’s large employer insurance laws, the plans must comply with
Title 41, Chapter 22, Idaho Code for the
- For AHPs with employer members that meet the definition of a small employer (no more than 50 employees, with a majority of the employees
located in Idaho), Idaho law subjects such plans to Idaho’s small employer provisions (see DOI’s AHP Guidance
for additional details). Therefore, AHPs covering small employers must meet the requirements of
Title 41, Chapter 47, Idaho Code and
IDAPA 18.01.69, such as:
- The carrier may establish a separate class of business for one or more association groups (41-4705, Idaho Code)
- Premium rates for any class of business may not differ from rates for any other class of business by more than 20% (41-4706(1)(a), Idaho Code)
- Premium rates for individual employees and dependents cannot vary due to claims experience (41-4706(1)(d), Idaho Code)
- Rating factors must be consistently applied to all employers within a class of business (41-4706(1)(f), Idaho Code)
- Rating factors are limited to age, gender, tobacco use and geographic location unless otherwise approved by Director (41-4706(1)(h), Idaho Code)
- When age is used as a rating factor, the same rating factor must be applied to all dependents under age 25 (41-4706(1)(i), Idaho Code)
- A rate manual must be developed and submitted to the Department for each class of business (IDAPA 18.01.69.036.01)
- Differences in rates must be based solely on reasonable and objective differences in plan design and benefits (41-4706(1)(j), Idaho Code
and IDAPA 18.01.69.036.08)
- No separate fee may be charged unless it is uniformly applied to all health plans in the same class of business and is considered premium
(IDAPA 18.01.69.036.10 and .11)
- Administrative fees which are included in rates must be uniformly allocated within a class of business (IDAPA 18.01.69.036.12)
- Disclosure requirements in advertising materials must address the extent to which rates are affected by expected or actual claims costs or
health status of employees; other rating factors used; renewability; and pre-existing condition provisions (41-4706(4), Idaho Code)
- Minimum participation rates must be uniformly applied among employers of the same size (41-4708(3)(e), Idaho Code)
- Fair marketing standards apply, such as: carriers must not discourage employers from applying or enrolling in a health plan due to health
status or claims experience, or enter into a contract with an agent (41-4716, Idaho Code)
- Carriers must submit the following to the DOI prior to the association marketing the plan:
- Copy of association articles of incorporation, partnership agreement, firm documents, bylaws, etc.;
- Narrative documenting the activities and benefits provided by the association to members which are not insurance related;
- Insurance policy, certificate, riders, endorsements, disclosures and applications;
- Copies of all insurance-related sales, marketing and advertising materials;
- A description of how the product will meet non-discrimination requirements regarding the acceptance and rating of employers; and
- The counties and/or zip codes making up the AHP service area.
What are the requirements to create a self-insured AHP?
Return to Health Care Guidance
- All AHPs, including those formed under the new rule and regardless of whether they are fully- insured or self-funded, are Multiple Employer
Welfare Arrangements (MEWAs). All MEWAs and AHPs which choose to be self-funded must comply with all requirements of
Title 41, Chapter 40, Idaho Code and
IDAPA 18.01.27. Detailed instructions, along with the necessary forms,
are available at the Department’s website at https://doi.idaho.gov/Company/SFHCP/Single.
- Some of the notable requirements include:
- Registration with the DOI, including the provision of the application form and all other required forms and documentation;
- Formation of a trust and the appointment of a trustee to manage and administer the AHP;
- Maintenance of actuarially sound rates, reserves, and minimum surplus;
- Submission of annual and quarterly financial statements; and
- Filing of the annual statement of taxes and fees, along with payment of the tax of 4¢ per month per beneficiary working or residing in Idaho.