Subscribe
Categories
  • 409A
  • COBRA
  • Commentary/Opinions/Views
  • Deferred Compensation
  • Employment Agreements
  • Equity Compensation
  • ERISA Litigation
  • Executive Compensation
  • Family and Medical Leave Act (FMLA)
  • Fiduciary Issues
  • Fringe Benefits
  • General
  • Governmental Plans
  • Health Care Reform
  • Health Plans
  • International Issues
  • International Pension and Benefits
  • Legal Updates
  • Multi-employer Plans
  • Non-qualified Retirement Plans
  • On the Lighter Side
  • Plan Administration and Compliance
  • Qualified Plans
  • Securities Law Implications
  • Severance Agreements
  • Tax-qualified Retirement Plans
  • Uncategorized
  • Welfare Plans
  • Archives
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • BC Network
    Friday, April 27, 2018

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across state lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    In Part 1 of this “Deep Dive” series, we examined the history of AHPs and the effects of the changes proposed by the Trump Administration by providing a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations, which include Affinity Arrangements, Group Insurance Arrangements (“GIAs”), and AHPs. In Part 2 of this “Deep Dive” series, we compared plan features of the three types of arrangements under current law.  In this installment of the “Deep Dive” series, we will examine the qualification requirements for AHPs under current law.

    Current Qualification Requirements for AHPs

    ERISA provides that an employee benefit plan may be maintained by an association of employers that effectively operates like a single employer.  Guidance around this concept has been developed through 40 years of case law and Department of Labor advisory opinions and, not surprisingly, such guidance is somewhat confusing and at times inconsistent. Nonetheless, certain basic principles can be garnered from the existing guidance. To be a bona fide association of employers, the members of the association must:

    • have a commonality of interest unrelated to the provision of benefits;
    • exercise control over the benefit plan; and
    • consist of employers with at least one employee.

    In addition, the association itself must

    • be a pre-existing organization; and
    • exist for a purpose other than providing health coverage to its members.

    The commonality of interest determination is made based on the facts and circumstances of each situation and is based on whether the members of the association have a genuine organizational relationship unrelated to the provision of benefits. Examples of activities that support a genuine organizational relationship include collaboration of resources for educational opportunities, developing marketing strategies, and other shared advocacy programs related to the particular industry. The group of employers must direct the operation and activities of the plan either through the ability to nominate, elect and remove a majority of the trustees or the ability to otherwise amend or terminate the benefit plan. Sole proprietors or other self-employed individuals who are not considered to be employees are not currently eligible to participate in AHPs.

    Benefit programs maintained by employers with no common industry affiliation or effectively controlled by a self-perpetuating board with no voice provided to the participating employers are not considered to be a bona fide association of employers. Practically speaking, very few association plans are treated as a single ERISA-covered plan under the current sub-regulatory framework, but instead are treated as a collection of plans each sponsored by individual employers.

    Currently, AHPs are subject to certain nondiscrimination requirements generally applicable to health insurance plans. AHPs are not allowed to discriminate within groups of similarly situated individuals with respect to eligibility, benefits and premiums based upon health-status factors. These rules do not, however, prohibit AHPs from varying premiums on an employer-by –employer basis.

    Next “Deep Dive”: Qualification Requirements for AHPs under the Proposed Rule

    Wednesday, March 21, 2018

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across State Lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American People.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    In Part 1 of this “Deep Dive” series, we started examining the history of AHPs and the effects of the changes proposed by the Trump Administration by providing a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations. This week, we compare features of the three types of arrangements when such arrangements are offered on a fully-insured basis.

    Comparison of Fully-Insured Arrangements

    Plan FeatureGroup Insurance ArrangementAffinity PlanAssociation Health Plan (fully-insured)
    ACA plan design requirements (e.g., requirement to provide essential health benefits)Look to size of employer to determine the extent to which ACA plan design requirements applyLook to size of employer to determine the extent to which ACA plan design requirements applyACA requirements relating to large employer plans apply
    Community rating rules (ACA)Look to size of employer to determine the extent to which ACA community rating rules applyLook to size of employer to determine the extent to which ACA community rating rules applyACA community rating rules do not apply
    State law community rating rulesLook to size of employer to determine the extent to which state community rating rules applyLook to size of employer to determine the extent to which state community rating rules applyState law community rating rules do not apply to the amount charged by the carrier to the AHP
    Ability to negotiate large discounts from carriersYesNoYes
    Ability to provide large firm solutions to small firmsYesNoYes

    The first two rows of this chart refer to which ACA plan design and rating rules apply to different types of plans, i.e. large or small plan rules. The third row of the chart addresses the extent to which state law community rating rules apply. The last two rows refer to the group health association’s ability to provide participants with the types of health insurance advantages procured by very large employers, such as lower plan administration rates.

    Next “Deep Dive”: AHP qualification under current law.

    Wednesday, March 7, 2018

    First in a Series

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across State Lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American People.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    With the renewed focus on AHPs, we will be examining the history of AHPs and the effects of the changes proposed by the Trump Administration in this “Deep Dive” series. First in our series is a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations: Affinity Arrangements, Group Insurance Arrangements (“GIAs”), and AHPs.

    Affinity Arrangements

    • A trade group or association (e.g., a local chamber of commerce) endorses a specific health plan.
    • The insurance carrier for the health plan pays a royalty to the trade group or association.
    • The insurance carrier issues standard fully-insured policies to members of the association who elect to purchase coverage through the health plan.
      • There may be a discount off the standard rate for the health plan offered to members purchasing coverage, to the extent permitted by state and federal community rating rules.
    • Each member that purchases the insurance policy has its own health plan that must independently comply with all associated legal requirements.
    • Each member that purchases the insurance policy files its own Form 5500, if applicable.
    • Because each member has its own health plan, the Affinity Arrangement is not subject to Multiple Employer Welfare Arrangement (“MEWA”) rules.

    Group Insurance Arrangements (“GIA”)

    • A trade group or association establishes an independent trust, and a health insurance carrier issues a single group insurance policy to the trust.
    • Association members purchase insurance through the trust and receive a certificate of coverage.
    • Each such association member is treated as having its own plan under ERISA.
    • The GIA files a single Form 5500 (which satisfies the Form 5500 filing obligations of all member firms).
    • The GIA is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.

    AHP

    • A trade group or association establishes an independent trust, and the health insurance carrier issues a single group insurance policy to the trust.
    • Association members purchase insurance through the trust and receive a certificate of coverage.
    • Unlike a GIA, the AHP is considered to be a single plan covering multiple employers.
    • The AHP files a single Form 5500 for the plan.
    • The AHP is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.

     

    Next “Deep Dive”: Comparison of Affinity Arrangements, GIAs, and AHPs under Current Law