The US Department of Labor has finalized a new regulation that will enable more small businesses and self-employed Americans to buy health insurance through association health plans (AHPs), which proponents say will help lower health insurance costs for smaller employers, but which critics say undercuts the essential coverage requirements created by the Affordable Care Act. The core impact of the nearly 200-page rule is to broaden the definition of the term “employer” under the Employee Retirement Income Security Act (ERISA), establishing new criteria under which employers can join together in an association that would still be regarded as a single “employer” for ERISA purposes. SHRM’s Stephen Miller discusses what that means for how small businesses buy group health insurance:
The broader interpretation of ERISA will let employers anywhere in the country that can pass a “commonality of interest” test join together to offer health care coverage to their employees. An association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:
- In the same trade, industry or profession throughout the United States.
- In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.
Sole proprietors will be able to join small business health plans to provide coverage for themselves as well as their spouses and children.
Previously existing AHPs, which were allowed under a more limited set of restrictions, will not be affected, unless they choose to expand in ways allowed by the new rule. The rule change, which President Donald Trump ordered the department to study last year, effectively exempts AHPs from ACA regulations that apply only to individual and small group plans by allowing them to operate in the more lightly regulated large group market. These regulations include the core package of health care services known as essential health benefits, which all plans in the individual and small group market are required to include but larger plans are not.