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Association Health Plans Guidance

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:

Vacated 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.


The final Association Health Plans rule, published in the Federal Register 6/21/2018 as 83 FR 28912 by the U.S. DOL, creates a new “pathway” for employers to form an Association Health Plan (AHP), offering more flexibility than previously existed. The rule may be viewed at https://www.federalregister.gov/documents/2018/06/21/2018-12992/definition-of-employer-under-section-35-of-erisa-association-health-plans .

All AHPs, including those formed under the new pathway and regardless of whether they are fully-insured or self-funded, are Multiple Employer Welfare Arrangements (MEWAs). Therefore, all AHPs must comply with pre-existing federal and state laws and regulations regarding MEWAs, as well as the provisions of the new rule. The new rule has established applicability dates of 9/1/18 for fully-insured AHPs, 1/1/19 for existing self-funded AHPs, and 4/1/19 for new self-funded AHPs formed pursuant to the new rule.

Summary of Federal Requirements

A substantial business purpose other than the provision of health benefits - Although the provision of health care benefits to its members may be the primary purpose for which an association is formed, it cannot be the only purpose. There must also 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. Although “business purpose” is not specifically defined in the rule, the rule provides examples of providing business-related educational materials or classes to members, setting business standards or practices, or advancing the interests of an industry.

Commonality of interest - Under the new rules, association members do not need to be in the same business or industry. However, they 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)

Formal organizational structure - The association must have a governing body and by-laws.

Control by employer members – Participating employers must exercise control of the association and the health plan. Employer members are considered to exercise control when they, for example:

  • Nominate and elect directors, officers, trustees or other members of a governing body;
  • Have authority to remove such directors, officers, trustees, etc.; or
  • Have the authority and opportunity to approve or veto decision affecting plan design, such as changes in coverage, benefits and premiums.

Non-discrimination – AHPs formed under the new rule must comply with federal nondiscrimination provisions. The plan cannot exclude an employer from participating, charge different premium rates, or otherwise discriminate against an employer member based on a health condition of one or more employees. Employer members can be treated differently based on:

  • Occupation or industry,
  • Region where an employer is located,
  • Participation in a wellness program, and
  • Any other non-health factor.

Federal Filing Requirements - The association must comply with federal requirements concerning MEWAs, including the requirement to file Form M-1 with the U.S. DOL at least 30 days prior to the effective date of the AHP, before extending operations to a new state, and annually thereafter.

Idaho Requirements (Fully-Insured)

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).

The recent federal rule specifically defines AHPs as MEWAs. The U.S. DOL also affirms that state authority to regulate such MEWAs continues without modification or limitation. Per the preamble to the rule, “[…] the final rule does not change existing ERISA preemption rules that authorize broad State insurance regulation of AHPs, either through the health insurance issuers through which they purchase coverage or directly in the case of self-insured AHPs.” In other words, the rule allows states additional flexibility if a state’s own laws and regulations permit. Therefore, the Department will continue to enforce its existing laws and rules concerning MEWAs, including AHPs. Importantly, Idaho’s small employer laws and rules (found in Title 41, Chapter 47, Idaho Code and IDAPA 18.01.69) include provisions that extend the small employer health benefit plan requirements to insured AHPs when any employer member of an association meets the definition of a small employer, regardless of the total size of the association itself.

For all fully-insured AHPs, carriers must submit the following to the Department, 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;
  • The counties and/or zip codes making up the AHP service area.

Offering coverage only to large employers: AHPs comprised of solely large employers are subject to Idaho’s large employer insurance laws and must comply with Title 41, Chapter 22, Idaho Code for the plan requirements.

Offering coverage that includes small employers: As explained above, Idaho’s small employer laws and rules extend Idaho’s small employer health benefit plan requirements to insured AHPs when any employer member of the association meets the definition of a small employer. Several of those provisions are included in the list below, which should be considered illustrative, not comprehensive.

Rates and Rating Requirements for Small Groups

  • 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)

Other Requirements for Small Groups

  • 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)

Idaho Requirements (Self-Funded)

In addition to submitting the documents identified for fully-insured AHPs, self-funded AHPs 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 requirements include:

  • Registration with the Department, 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.

The plan administrator, if other than the trustee, must comply with the requirements for third-party administrators set forth in Title 41, Chapter 9, Idaho Code including the requirement to be registered with the Department.

Additional information regarding agents and AHPs can be viewed on our Association Health Plans FAQ page.



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