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Small Biz Health Plans Get Boost

Last October, President Trump signed an executive order aimed at helping small businesses obtain reasonably priced health insurance by expanding their ability to use an insurance vehicle called an Association Health Plan or AHP.

In January, the Department of Labor proposed new regulations to govern the formation and management of these kinds of health insurance arrangements.

Based on 2015 statistics, the proposed rule has the potential of positively impacting the health coverage of an estimated 44 million people, according to the Labor Department.

This is expected to be accomplished by expanding coverage to the uninsured, by making more affordable coverage available to sole proprietors and small employers, or by cutting back some individuals’ benefits.

Under the Employee Retirement Income Security law adopted in 1974, employee welfare benefit plans that provide medical benefits in the form of group health plans can be established by both employers and employee organizations.

This is why large regional Teamsters union conferences also operate health and welfare plans in addition to their multiemployer pension plans.

However, under ERISA, only a “bona fide” employer association can establish a group health plan. A bona fide employer association must consist of individual member employers who join together for reasons other than providing health coverage.

They also must have more than one common law employee – defined as someone other than a sole owner and his or her spouse or a partner.

They must control the association, and share a “commonality of interest,” meaning member employers and the association share a close economic or representational interest, like operating in the same industry.

Obamacare further restricted plans in the individual and small group markets (50 or fewer employees) by requiring they provide “essential health benefits.” In addition to covering the usual health services, these include such things as mental health and substance abuse services, and wellness programs.

Plans in the large group market (51 or more employees) are not required to provide these essential health benefits, although many of them do.

The new rules proposed in January would relax existing requirements but still maintain certain protections. They also aim to make sure that AHPs resemble employer-sponsored arrangements but do not offer commercial insurance.

AHPs will be able to form for the exclusive purpose of sponsoring a group health plan – no longer would they need another reason to justify their existence.

In addition, sole proprietors and other joint owners of businesses with no common law employees, such as partners in a partnership, will now be able to participate, provided they earn income from the business that at least equals the cost of covering the owner and any dependents.

The proposal also expands the commonality of interest definition to those in the same trade, industry, line of business or profession, regardless of state boundaries or are located in the same state or metropolitan area.

Attorney Alex Glaser of the law firm of Phelps Dunbar LLP says the changes can result in lower health care costs for sole proprietors and small employers; greater negotiating power with insurers for insured AHPs and for self-funded AHPs with their health care providers; and should reduce administrative costs through economies of scale.

Glaser also contends that the rules would allow AHPs to customize their benefits packages and reduce costs by excluding certain health benefits.

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