Implementation of the new Federal Association Health Plan (AHP) Rule—and new options for associations seeking to offer health insurance coverage—is well underway. The new rule became effective for all fully-insured AHPs seeking to operate under the new rule in September, and will go into effect for existing self-insured AHPs seeking to operate under the new rule on January 1st. The final effective date comes on April 1st , when the new rule will go into effect for new self-insured AHPs seeking to establish under the new rule. PCG subject matter experts provided an overview of the Final AHP Rule shortly after it was finalized, and provided an update earlier this fall about State reactions to the rule.
Many states have taken action in response to the new AHP Rule. Some acted immediately upon—or even prior to—the new rule being finalized, while others continue to weigh their options and the needs within their markets related to the increased flexibility now offered at the Federal level. In this article we take a deeper dive into the responses in two neighboring states: New Hampshire and Vermont.
In addition to their geographic proximity, New Hampshire and Vermont are both small states (though Vermont has about half of the population of its neighboring state) and have relatively similar numbers of people purchasing private insurance. Both also have economies dominated by small businesses. Despite these similarities, these two states are approaching AHPs and the Federal AHP Rule differently in terms of both process and substance. At a high level, Vermont sought to take action immediately, while New Hampshire has undertaken a slower stakeholder-engaged process to craft its full response to the rule. In addition, Vermont has raised concerns about the expansion of access to AHPs and has very explicitly expressed a need to further regulate these products that could otherwise become more prevalent under the new Federal rule, while New Hampshire is seeking to take advantage of the opportunity to expand options for small businesses in the state.
Even before the adoption of the final AHP Rule, the Vermont legislature passed Vermont Act 131, which directs the Department to adopt rules to “protect Vermont consumers and promote the stability of Vermont’s health insurance markets.” In response, Vermont’s Department of Financial Regulation filed emergency regulations that govern fully-insured AHPs shortly after the AHP Rule was finalized. In announcing the regulations, the Department shared its concern that the Federal AHP Rule greatly expands the ability of small businesses and self-employed workers to get coverage via the large group market. According to the Department, the primary purpose of the State rule is consumer protection, while at the same time allowing “legitimate” AHPs to operate in the state.
The Department stated that it filed the rule as an emergency rule in order to ensure they would be in place by the September 1st initial effective date of the Federal rule. At the same time, it filed proposed regulations to ensure an opportunity for a public hearing and comment. The Department plans to promulgate separate rules governing self-insured AHPs.
The Vermont rule includes procedural requirements, while also setting higher standards for the eligibility of, rating of, and coverage provided by AHPs than the Federal standards. Specifically, the rule includes:
- Rating requirements: Insurers must receive approval of rates and guarantee rates for at least 12 months; community rating is required and rating based on age, gender, geography, health status, industry, medical underwriting, experience, tier and duration is specifically prohibited; plans must meet ACA minimum medical loss ratios
- Guaranteed issue requirements: coverage must be available to all association members and dependents
- Minimum eligibility requirements: minimum participation; being organized and maintained for a good faith purpose other than offering insurance; having been in existence for at least one year; having a constitution and bylaws that meet enumerated requirements; meeting the commonality of interest test (the employers must be in the same trade, industry, line of business or profession or have their principal places of business in Vermont; cannot be limited by geography within the state)
- Benefit requirements: must provide comprehensive coverage, including: the Essential Health Benefits (EHBs); complying with ACA cost-sharing limitations and limits on lifetime and annual limits; providing a level of coverage equivalent to at least a 60 percent actuarial value; complying with state insurance regulations relative to consumer protections and quality requirements for managed care organizations and all other insurance requirements and benefit mandates; providing all benefits required by Federal law; providing pediatric dental and vision coverage
- Licensure requirements: associations offering fully-insured plans must be licensed by the state and file annual financial statements
- Surplus requirements: associations must meet minimum surplus requirements
- Must include an appeals process
- May not include an exclusion, limitation or waiting period for preexisting conditions
- A standard notice must be provided to employers and employees that includes contact information for the Department and information about coverage available through the Marketplace
- Insurers must file advertising and marketing materials
- Insurers must comply with open enrollment and special enrollment periods applicable to the state’s Marketplace
- AHPs may not use the terms bronze, silver, gold or platinum in their names
The stated goals of the regulation are to ensure that individuals receive affordable coverage and “the benefits to which they are entitled under state and federal law,” and to ensure the plans do not compete unfairly with the comprehensive coverage offered in the state.
As emergency regulations, the rule went into effect immediately and was put out to comment prior to being finalized permanently. However, the state’s Legislative Committee on Administrative Rules rejected them as not stringent enough to fulfill the legislative mandate. Among the further options now being considered is a look-through doctrine similar to that currently in place in New Hampshire (as outlined below) and a handful of other states, though that may require a statutory change. Despite the rejection, the Department can—and intends to—still implement the rule, so standards are in place pending any further statutory change.
The New Hampshire Insurance Department, on the other hand, took a two-step response to the Federal AHP Rule. The first response from New Hampshire was to issue guidance that—unlike the guidance issued in Vermont—simply restates existing State law, rather than taking action at the administrative level to make changes to State rules for AHPs.
New Hampshire issued a bulletin reminding carriers that the new Federal rule does not preempt State law, and that AHPs are subject to the same requirements as any group health insurance plan. Specifically, New Hampshire law includes a look-through provision for the rating of fully-insured health plans, including those issued through associations. If small groups or individuals are members of an association, the premiums for their coverage must comply with small group / individual rating rules. Fully-insured AHPs are also currently subject to licensure requirements. Self-insured coverage for associations is also more limited under New Hampshire law than Federal law, as far as what associations are eligible for such coverage.
At the same time that it reminded carriers and associations of the rules currently in place in New Hampshire, the state also began exploring the possibility of making changes to State law. However, unlike the regulatory action in Vermont, that action is aimed at expanding access to AHPs and, without existing authority to do so at the regulatory level, the Insurance Department is considering pursuing changes at the legislative level.
The New Hampshire Insurance Department convened a stakeholder working group through the fall with the goal of getting consensus—or at least stakeholder input—on legislation that would be filed seeking to address inconsistencies between Federal and State law regarding AHPs. The state’s Insurance Commissioner stated that “[o]ur goal in convening this stakeholder group is to develop legislation that will create clear standards and enable New Hampshire employers to benefit from the availability of new coverage options…At the same time, we would like to minimize any potential negative impacts to other health insurance markets and ensure that we are protecting consumers.” The state’s Governor has also expressed support for expanding AHPs, seeing them as a way to spread administrative costs, increase employers’ bargaining power, and bring more people into the market.
The working group met three times with the charge of providing input to the Department regarding opportunities created by the Federal AHP Rule, including informing a possible legislative effort. Discussions with the group started with providing general input into the concept of expanding access to AHPs and the importance of clear guidance, then dove into a more detailed consideration and discussion of specific questions, including those related to:
- Eligibility requirements
- Coverage requirements (specifically relative to EHBs, Mental Health Parity and state mandates)
- Rating requirements (whether the AHP should be rated as a single large group, and whether experience rating and other rating factors should be allowed)
- Applicability of standards to out-of-state plans
- How requirements should vary between fully-insured and self-insured coverage
- Any additional limits or restrictions that should be in place (e.g., those related to risk selection, nondiscrimination requirements, solvency / financial stability requirements, fraud prevention, other consumer protections)
- Whether AHPs should be subject to claims data reporting requirements
The group also discussed the expected impact of changing the standards applicable to AHPs.
The working group did not come to consensus on an approach to AHPs, and the Department closed the final meeting by sharing that it continues to consider a possible legislative initiative for 2019.
As states continue to consider whether and how to respond to the Federal AHP Rule, it is worthwhile to consider how states similar to them are responding, beyond the two states discussed above. For more information about initial state responses, click here.