States across the country have spent the past few months reviewing and considering two significant rules promulgated at the Federal level over the summer: the final rule on Association Health Plans (AHPs) issued by the Department of Labor in June, and the final rule on Short Term Limited Duration Insurance (STLDI) issued by the Departments of the Treasury, Labor, and Health and Human Services in August.
With widespread state action taking place in response to the changes, our webinar earlier this week highlighted key considerations and provided examples of activity in response to and related to the final rules. We have made those slides available for those who were unable to attend or would like to access the information we presented.
Association Health Plan Rule
As a reminder, the Association Health Plan (AHP) Rule:
- Makes the standards for being considered a “bona fide association” more flexible, making it easier for associations of small employers to meet the requirements to purchase large group insurance via an AHP;
- Allows sole proprietors with no employees to be considered a small employer and employee for the purposes of purchasing insurance via an AHP; and
- Subjects AHPs to more stringent non-discrimination provisions.
For a more detailed analysis of the changes please see the PCG prepared fact sheet on the AHP Final Rule The Department of Labor and the Internal Revenue Services have also disseminated follow-up guidance.
As states have reviewed the AHP Final Rule, they have had to consider:
- The impact of coverage and benefit differences on enrollees and how to ensure enrollees are appropriately aware of those differences when making coverage decisions;
- The impact of the movement of likely healthier individuals from the individual and small group insurance markets in their states to large group insurance via AHPs and how that migration will impact the risk profiles of and premiums in the individual and small group markets;
- Jurisdictional issues related to oversight and enforcement that could arise between states as AHPs sell coverage across state lines; and
- The expectation that Navigators educate consumers about the availability of AHPs.
Several states have taken action in response to the AHP Final Rule. An overview of state action is detailed below. While the vehicles vary, including statutory changes, regulations, bulletins and other guidance, many of the provisions included are consistent across states.
- Existing State Law: Several states have used bulletins or other guidance to highlight and assert the continued applicability of existing State law.
- Look-through Provisions: Many of the states have promulgated look-through provisions related to benefits / coverage and / or rate requirements, meaning that whether individual, small group or large group rules apply is based on the size of each member organization of the group and not the size of the group overall.
- Bona Fide Association Rules: Several states continue to require satisfaction of the traditional bona fide association standards (related to commonality of interest and purpose) for AHP eligibility. In addition to requiring that the association have a primary purpose other than offering an AHP, some states require that the association have been in existence for a minimum amount of time prior to establishment of the AHP.
- Jurisdiction: Most states that have taken action have explicitly asserted jurisdiction over AHPs that issue coverage in the state even if they are sited in other states.
Additionally, the Attorneys General of 11 states and the District of Columbia have jointly filed a lawsuit challenging the AHP Final Rule. The pending suits asserts that the rule exceeds the authority of the Department, specifically; the rule changes undermines long-standing ERISA interpretations (related to the requirements for being a bona fide association and eligibility of working owners), the Affordable Care Act (ACA) and is a violation of the Administrative Procedures Act. Related to the ACA, the lawsuit asserts that the rule changes undermine ACA protections specific to the individual and small group market and are inconsistent as to whether an association is an employer itself (given that it is for the purposes of market rules but not for purposes of applicability of the employer mandate). As such, the suit asserts that the AHP Final Rule increases the risk of fraud and hard to individuals and increases burden on states.
Tracking Chart 1: State Activity regarding Association Health Plan Final Rule
Short Term Limited Duration Insurance Rule
As a reminder, the Short Term Limited Duration Insurance (STLDI) Rule:
- Extends the permitted duration of STLDI plans from 3 months to up to one year;
- Allows for renewals of STLDI contracts for up to 36 months and allows for the stacking of contracts and purchasing of options; and
- Amends the standards for required consumer notices.
For a more detailed analysis of the changes please see the PCG prepared fact sheet on the STLDI Final Rule.
As states have reviewed the STLDI Final Rule, they have had to analyze many of the same considerations at play with AHPs:
- The impact of typical STLDI coverage limitations on enrollees and whether Federal notice requirements are sufficient to ensure enrollees are appropriately aware of those differences when making coverage decisions, particularly as these plans are now more of alternative options than gap-fillers;
- The impact of the movement of expected healthier populations from the individual market into STLDI plans, which are not part of the single market-wide risk pool, and how that migration will impact the risk profiles of and premiums in the individual market;
- The option of seeking a Section 1332 Waiver to allow income-eligible individuals to use Federal premium subsidies to purchase STLDI plans; and
- The expectation that Navigators educate consumers about the availability of STLDI.
As with AHPs, there are common themes in State responses to the STLDI Final Rule. Through legislation, regulations, bulletins and other guidance, states have had a range of reactions to the rule, some of which is final and others are pending. Each state action is detailed below, including efforts that ultimately failed.
- Banning STLDI: A handful of states – Massachusetts, New Jersey and New York had already banned STLDI plans. New York issued a letter to issuers restating that ban. California just passed legislation banning STLDI plans and Rhode Island has legislation pending to do so.
- Duration and Renewal: Several states have imposed more limited durations for STLDI plans being issued in their states (between 3 months and 6 months). States have also limited or prohibited the renewal of STLDI plans. A handful of states have sought unsuccessfully to extend the permitted duration of STLDI from more limited time periods to up to a year as now permitted under Federal law.
- Eligibility: Some states have also limited the individuals to whom STLDI may be issued, including prohibiting (or seeking to prohibit) issuance to those who were eligible to purchase individual market insurance during prior open enrollment periods or special enrollment periods.
- Notice: Several states have imposed (or sought to impose) State-specific notice requirements, including uniform notices in some states.
Even prior to the passage of the STLDI Final Rule, a number of State laws further regulated STLDI plans, commonly in the following manners:
- Requiring insurers that offer STLDI plans to also offer individual market plans;
- Requiring STLDI to cover State mandates;
- Limiting the duration of STLDI coverage (some apply to all STLDIs issued for an individual);
- Prohibiting the exclusion of pre-existing conditions;
- Imposing minimum medical loss ratios; and
- Prohibiting STLDIs.
Tracking Chart 2: State Activity- Short Term Limited Duration Insurance Final Rule