New Guidance on Association Health Plans

The standards for Association Health Plans (AHPs) continue to be in flux at the Federal level following the Federal District Court ruling at the end of March that invalidated major portions of last summer’s final Federal rule on AHPs. Since the final rule was already in effect for fully insured AHPs and existing self-insured AHPs, and because a stay was not requested or issued on the ruling, this decision led to uncertainty for insurers, employers and enrollees regarding its impact on AHPs already operating under the new rule. In an effort to clear up the questions triggered by the ruling, the Department of Labor (DOL) has issued several pieces of guidance.

Almost immediately, the DOL released preliminary guidance in the form of Questions and Answers. Since then, the DOL has issued more guidance (April 29th guidance; May 13th Q&A) explaining its position on AHPs following the ruling. In its various communications, the DOL has reiterated its focus on ensuring that existing AHP enrollees have their claims paid as promised, and on reducing adverse consequences for those that relied in good faith on the final rule. Specifically, the guidance released clarifies the following:

  • The guidance that was in effect prior to the new rule, and AHPs established in accordance with those standards, are not impacted by the court ruling.
  • AHPs cannot be newly formed or amended under the flexibility provided by the new rule that has now been invalidated. As a result, because the final rule had not yet gone into effect for the establishment of new self-insured AHPs prior to the ruling, no self-insured AHPs were—or can be—newly formed under the final rule.
  • Employers and individuals who purchased AHP coverage prior to the court decision may maintain that coverage through the longer of the plan year or contract term, even if the AHP was established under the flexibility provided by the new rule that has now been invalidated. Insurers must uphold their existing policies and pay valid claims for the term of their plans regardless of the court decision.
  • Existing AHPs formed under the flexibility of the now-invalidated new rule prior to the court ruling may not be marketed or sold to new employers or sole proprietors. However, existing employer members may enroll new employees under special enrollment periods (including new hires and dependents).
  • The DOL and the Department of Health and Humans Services (HHS) will not enforce the court decision against parties whose potential violations as a result of the rule being invalidated stem from actions that were taken prior to the court decision and in compliance with the final rule. That includes existing AHPs that were established prior to the court decision in compliance with the new flexibility provided under the final rule, which continue to provide benefits to members that enrolled prior to the court decision through the remainder of the plan year or contract term. Likewise, HHS will not find a state to be failing to substantially enforce requirements under Title XXVII of the Public Health Service Act because it is not enforcing the court decision through the remainder of existing plan years or contract terms.
  • While coverage must be guaranteed renewable at the end of the year, the AHP must come into compliance with the court ruling at that time (meaning that the plan must comply with the individual market rules for sole proprietor enrollees and with small group market rules for small employer enrollees).

The DOL appealed the court’s decision on April 26, 2019. The appeal will be heard by the Court of Appeals for the District of Columbia.

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