01 Mar Proposed DOL Rule Opens Door for “Association” Health Plans
On January 5, 2018, the Department of Labor (the “DOL”) issued a proposed rule for notice and comment which would allow groups or associations of employers to offer group health plans, subject to certain requirements. Comments to the proposed rule are due on March 6, 2018.
The proposed rule borrows from previous DOL opinion guidance which treats certain associations of employers “single employers” for purposes of applying ERISA’s group health plan provisions. To that end, the proposed rule amends the definition of employer to include “a group or association of employers” that acts “directly or indirectly in the interest of an employer, including for purposes of establishing or maintaining an employee welfare benefit plan.” To be eligible to establish a group health plan, the group or association must satisfy the following requirements:
- Exist for the purpose, in whole or in part, of sponsoring a group health plan that it offers to its employer members;
- Each employer member of the group or association participating in the group health plan is a person acting directly as an employer of at least one employee who is a participant covered under the plan;
- The group or association has a formal organizational structure with a governing body and has by-laws or other similar indications of formality;
- The functions and activities of the group or association, including the establishment or maintenance of a group health plan, are controlled by its employer members, either directly or indirectly through the regular nomination and election of directors, officers, or other similar representatives that control the group or association and the establishment or maintenance of the plan;
- The employer members, based on all relevant facts and circumstances, have a commonality of interest, which may be established by the employers being in the same trade, industry, line of business or profession, or being located in a region in the same area of a state or metropolitan area;
- The group or association does not make health coverage available to anyone other than employees and former employees (and their families or other beneficiaries) of employer members;
- Comply with certain nondiscrimination rules; and
- Not be a health insurance issuer.
The nondiscrimination rules described above require that:
- The group or association not condition employer membership based on any health factor of an employee or former employee (or family member or other beneficiary of such employees);
- The group or association complies with the rules relating to nondiscrimination with respect to eligibility for benefits and required premiums or contributions for coverage;
- The group or association does not treat employer members as distinct groups of similarly-situated individuals.
There are numerous examples illustrating the nondiscrimination requirements in detail.
Finally, the rule allows for participation by “working owners” in a group health plan sponsored by a group or association provided the individual is not eligible to participate in a group health plan maintained by any other employer or his or her spouse. The definition of “working owners” includes any individual who has an ownership right in a trade or business, including partners and other self-employed individuals, who works at least 30 hours per week or 120 hours per month for the trade or business, and who has earned income from that trade or business that covers at least the cost of coverage for the owner and his or her covered family members or beneficiaries.
While many associations may have already taken advantage of previous DOL guidance to adopt group health plans, the DOL’s proposed regulations could cause an influx of additional associations to begin offering group health plans to their members. Additionally, the extension of an association plan’s ability to cover working owners is significant in that it could allow for sole proprietorships within a trade or geographic area to organize associations for the purpose of establishing group health plans.