What Employers Need to Know About the DOL s Association Health Plans Final Rule

Transcription

1 What Employers Need to Know About the DOL s Association Health Plans Final Rule Presented by: Lorie Maring Phone: (404) lmaring@

2 AGENDA Provide an overview of the U.S. Department of Labor s (DOL s) association health plans final rule. Discuss the non-regulatory definition of employer and non-regulatory guidance on association health plans. Describe how the association health plans final rule is different than non-regulatory guidance. Discuss the challenges and potential solutions to forming a self-funded association health plan. Explain how states currently regulate association health plans and discuss how states may continue to regulate associations health plans, in light of the final rule. Discuss successful models of association health plans. Discuss how brokers can assist employers in joining or creating association health plans.

3 DOL Association Health Plan Administration s Goals: Give small employers access to large group market Allow sole proprietors and independent contractors to participate Avoid market reforms that make individual and small group coverage more costly Final Rule Issued 6/19 Modified the Proposed Rules Staggered Effective Dates beginning 9/1/2018 through 4/1/2019 Failed to expand ERISA preemption Subject to a lawsuit by an expanding number of states

4 What Changed from Proposed Rule? Clarified that Pre-Rule Guidance is Still Good Law Two tracks for AHP/MEWAs New AHP Final Rules Existing (and presumably future) rulings Three types of AHP/MEWAs Bona Fide MEWA under pre-rule guidance AHPs under final regulations Non-Plan Level MEWAs under pre-rule guidance

5 What Changed from Proposed Rule? Associations must have substantial business purpose unrelated to providing health insurance Clarifies that AHPs may discriminate against one or more individuals based on nonhealth factors such as age, gender, industry, occupation or geography Clarifies open enrollment periods to limit adverse selection Clarifies that AHPs under pre-rule guidance have more flexibility to discriminate in premium rating by individual employers Made changes to rules for qualifying sole proprietors for AHP coverage Clarified wellness incentives allowed Clarifies that employer members must have control in form and substance

6 AHP Effective Dates September 1, 2018 fully-insured AHPs January 1, 2019 existing self-insured AHPs that are Plan Level MEWAs under existing DOL guidance April 1, 2019 new self-insured AHPs formed under final rule While AHP rules are final at Federal Level State activity is increasingly hostile

7 Pre-Rule AHP/MEWAs MEWA: A multiple Employer Welfare Arrangement ( MEWA ) is defined as (1) an employee welfare benefit plan or (2) other arrangement that is established or maintained for the purpose of offering or providing medical or other welfare benefits to employees of TWO OR MORE unrelated employers, including self-employed individuals. Unintentional MEWA (Un)related employers Independent Contractors Intentional MEWA Self-Funded Trade Association Plan Insured Trade Association Plan Self-Funded Commercial MEWA Insured Commercial MEWA

8 MEWA BASICS All MEWAs under Pre-Rule Guidance are Either a Plan or Non- Plan MEWA ERISA applies to employee benefit plans To be an employee benefit plan, you need an employer sponsor A MEWA can be one employee benefit plan sponsored by one employer (a Plan MEWA ) or A MEWA can be multiple employee benefit plans sponsored by each employer in the MEWA (a Non-Plan MEWA ) AHPs under Final Rule are generally treated as Plan MEWAs But while Pre-Rule MEWAs apply to any welfare benefit program, AHPs under Final Rule limited to health plans (any ancillary benefits in an AHP are at the employer level for ERISA compliance as a Non-Plan MEWA)

9 MEWA BASICS How do you know? - Determined based on status of participating employers as a single employer An employer is defined in ERISA section 3(5) as any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity. EBP Employer/plan sponsor EBP Employer/plan sponsor EBP Employer/plan sponsor EBP Employer /Plan Sponsor

10 MEWA BASICS PRE-RULE Group or Association of Employers as a Single Employer under ERISA DOL views only a very small number of MEWAs at the planlevel and as sponsored by a single employer three general factors in DOL/Court rulings Bona fide group or association of employers not formed for purpose of obtaining insurance - pre-existing relationships Not the same as association plans for underwriting/hipaa Commonality of Interest how members solicited, purposes for which organization formed, who actually participates Control Employer-members must have special status and control (in form and substance) over the MEWA DOL Advisory opinion A provides any MEWA covering a working owner with no common law employees cannot be a Plan-level MEWA. NON- PLAN MEWAs PLAN MEWAs

11 AHP FINAL RULE Qualifying AHPs as plan level MEWAs will be exempt from the following PHSA requirements on federal level as large group coverage: Community rating Premium rating restrictions of 3:1 Requirement to provide EHBs Medical Loss Ratio requirements Guaranteed issue/renewability Single risk pool by issuer Risk adjustment program Look Through Policy CMS bulletin 9/1/2011 status as individual, large group or small group for federal law is based on status as an ERISA employer if association is not a single employer, must look through to size of each participating group or individual for status

12 AHP FINAL RULE AHP as a Single Employer Although rules materially relax ERISA definition of employer, still designed to exclude commercial enterprises and focuses on employer status: Only employers and their employees/dependents can participate (no size limit) AHP must have formal structure and organization Employers must control the AHP in form and substance Must be an employer association (not a membership organization such as AAA) and cannot be an insurance carrier Same trade or industry or geographic restrictions Must have substantial business purpose other than insurance Working owners must show legitimate business Must not discriminate on health factors

13 Primary Purpose Primary purpose may be to offer and provide health coverage to employer members and employees Must have at least one substantial business purpose other than providing insurance DOL Safe Harbor: the group or association would be a viable entity in the absence of sponsoring an employee benefit plan not required to be a for-profit activity Example: Association convenes conferences and provides educational materials and opportunities to its members

14 Employer Members Each employer member of the AHP is a person acting directly as an employer of at least one employee covered under the plan Insurance carrier may participate in AHP as an employer of its covered employees For purposes of Final Rule AHPs only, working owners are treated as employers if: Individual has an ownership right of any nature in a trade or business, including partnership and self-employed Is earning wages or self-employment income from the business Either (1) works in the business 20 hours a week or 80 hours a month and (2) earns enough income to cover cost of health coverage for individual and dependents Determination of working owner status must be periodically confirmed by AHP

15 Non-Discrimination Generally, the ACA/HIPAA non-discrimination rules will apply at AHP level Membership in the group or association cannot be based on any health factor The group or association cannot establish eligibility rules that discriminate on the basis of a health factor The group or association cannot discriminate with regard to premiums based on health factors Prohibits eligibility distinctions and premium differences between individual employers based on health status (e.g. claims experience) Pre-rule bona fide AHPs have more flexibility However, associations can set rates based on bona fide employment-based classifications (such as part-time or full-time), age and gender, or based on geography or industry type other laws may prohibit age and gender distinctions

16 Commonality of Interest DOL significantly relaxed the commonality of interest requirement in prerule guidance, two ways to satisfy: Limited Geographic Area: Principal place of business in a single state or metropolitan area (safe harbor: an area that matches a Metropolitan Statistical Area or a Combined Statistical Area as defined by OMB) Being in the same trade, industry, line of business, or professions (not defined and to be construed broadly). North American Industry Classification System (NAICS) codes (also used in Form 5500 Annual Reports); Standard Industrial Classification codes (which precede the NAICS); The OECD International Standard Industrial Classification; Any other generally-accepted classification system of the same sort; and/or The line of business test set forth in Treasury Regulations governing membership in a voluntary employees beneficiary association (VEBA). Specifically, employees of one or more employers engaged in the same line of business in the same geographic locale will be considered to share an employmentrelated bond for purposes of an organization through which their employers provide benefits.

17 Formation and Control Formal organizational structure. Generally look to state law not required to be a non-profit Control by employer members: Control must exist in form and substance determined by relevant facts and circumstances, including: Whether employer members regularly nominate and elect directors, officers, trustees, or other similar persons that constitute the governing body or authority of the employer group or association and plan Whether employer members have authority to remove any such director, officer, trustees, or other similar person with or without cause; and Whether employer members that participate in the plan have the authority and opportunity to approve or veto decisions or activities which relate to the formation, design, amendment, and termination of the plan, for example, material amendments to the plan, including changes in coverage, benefits, and premiums.

18 AHPs Subject to ERISA Final Rule AHPs are ERISA employee benefit plans and must comply with the following ERISA requirements: Reporting and disclosure requirements i.e., SPD, SMM, SBC, Form 5500 (with audit for funded plans), SAR, Form M-1 (annual filing for MEWAs and requires 30-day advance registration before operating) Fiduciary responsibility, prohibited transactions rules, and trust requirements (note even fully-insured AHPs may need a trust if administrator collects premiums) Administrative and enforcement provisions claims procedures, remedies available to participants and preemption provisions Preamble declined to address application of most other federal laws to AHPs that may not be based on ERISA definition of employer for determining size and leaves open room for future guidance on whether group size or look through approach for COBRA, ACA mandate, Medicare Secondary Payer; premium tax credit rules, etc. Preamble did emphasize that MHPAEA applies to AHPs based on the aggregate size of the group under the definition of employer in ERISA Section 3(5)

19 AHP FILING REQUIREMENTS FORM 5500 Final Rule AHPs file one Form 5500 (participating employers have no separate filing requirement) Final Rule AHPs offering non-health benefits appears each participating employer would need to file a Form 5500 unless AHP qualifies for special rule allowing fully insured MEWAs to file Form 5500 as a direct filing entity (DFE) All AHPs must include proof of compliance with the Form M-1 filing obligation as part of the Form 5500 filing No small plan (less than 100 participants) exception from Form 5500 filing requirement allowed for AHPs

20 AHP FILING REQUIREMENTS FORM M-1 AHP must file a Form M-1 with the DOL on an annual basis by March 1 (subject to a possible 60-day extension) AHPs must file its initial Form M-1 in the following events 30 days prior to operating in any state Within 30 days of knowingly operating in any state that is not identified on a previous Form M-1 Within 30 days of operating for employees of an additional employer after a merger with another AHP Within 30 days of the date the number of employees receiving coverage increases by 50% from the prior year Within 30 days of experiencing a material change as defined in the Form M-1 instructions

21 ERISA PREEMPTION DOL declined to expand ERISA Preemption limiting opportunity for expansion of AHPs noted it could reconsider if state s severely restrict AHPs from operating The scope of state regulation of MEWAs depends upon whether the arrangement is fully insured or self-funded Fully insured MEWA an arrangement where all of the benefits are determined by DOL to be guaranteed under an insurance contract issued by an insurer authorized to do business in a state purchase of stop-loss or reinsurance does not make a MEWA fully insured Self-funded MEWA any arrangement that is not fully insured Fully Insured AHP subject to any state insurance law regarding maintenance of specified levels of reserves, contributions or funding requirements (i.e., licensing, registration, financial reporting, examination, audit requirements). States have broad power to regulate self-funded MEWAs, including AHPs not determined by DOL to be fully-insured, regardless of EBP status as long as the law relates to insurance regulation and is not inconsistent with ERISA. Preamble notes states may impose EHB and other coverage mandates.

22 DOL Association Plan Proposal State Regulation State Concerns with AHP Expansion: Self-funded MEWAs have a long history of fraud and inability to pay benefits prohibited or heavily regulated in many states, in most regulated as an unlicensed insurance company Cherry picking good risk forming associations of industries with healthier employees/working owners AHP sponsors adopting policies in states with less consumer protections Impact on individual and small group markets

23 DOL Final Rule State Reaction States poised to frustrate AHP Expansion: Lawsuit challenging rule s implementation (D.C. and 11 states have joined to date): Possible increased restrictions and rules prohibiting self-funded and fully-insured AHPs EHB requirements on AHPs Prohibiting sole proprietors/small employers from participating in AHPs Requiring sponsoring association to have been in existence for a number of years before sponsoring health plan Possible creation of reinsurance/bail-out funds by additional fees on self-funded AHPs Possible assessments on all AHPs to shore up degradation of smallgroup/individual MKTs Imposing extra-territorial or state-level look-through rules (e.g. Mass prohibits small employers from forming large group MEWAs, NY imposing look through and EHBs on AHPs)

24 Challenges for Self-Funded AHPs Increased costs for compliance Financial audits Trust requirement Tax-exempt VEBA may not be an option Heightened fiduciary requirements under ERISA for trustees No limitations by DOL on states ability to regulate already prohibited in many states May need to be a licensed insurance carrier/maintain significant reserves to operate May need to limit to single states where MEWA friendly - but caution that even historically friendly states have joined lawsuit and proposing rules to restrict AHPs

25 Opportunity for Creating Fully- Insured AHPs Single state or region that is MEWA friendly Existing trade associations Franchisors Chambers of Commerce Application process for DOL?? currently no formal procedure and must obtain an advisory opinion for determination of fully-insured status for ERISA preemption protection (DOL could issue future guidance addressing this issue)

26 NEXT STEPS Engage local counsel for evaluation of state regulation and likely changes Monitor future guidance from DOL and outcome of litigation Determine whether qualification as a Bona Fide AHP or Final Rule AHP is better for your situation Consider impact of state extraterritorial, look-through and EHB requirements Be prepared to fully vet any self-insured AHP as a participating employer to ensure proper protections are in place for benefit payments

27 Final Questions HRCI SHRM Presented by: Lorie Maring Phone: (404)

28 Thank You Presented by: Lorie Maring Phone: (404)