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1 Today s webinar will begin shortly. We are waiting for attendees to log on. Presented by: Lorie Maring Phone: (404) lmaring@ Please remember, employment and benefits law compliance depends on multiple factors particularly those unique to each employer s circumstances. Numerous laws, regulations, interpretations, administrative rulings, court decisions, and other authorities must be specifically evaluated in applying the topics covered by this webinar. The webinar is intended for general-information purposes only. It is not a comprehensive or all-inclusive explanation of the topics or concepts covered by the webinar.

2 What Employers Need to Know About the Proposed Regulations Regarding Association Health Plans Presented by: Lorie Maring Phone: (404)

3 AGENDA Provide an overview of how ERISA currently defines employer and how the proposed regulations would change that definition Describe the DOL s proposed requirements that would permit an association health plan to offer a single group health plan Discuss the nondiscrimination provisions that would apply to association health plans Describe multiple employer welfare arrangements (MEWAs) Describe how states differ in their treatment of MEWAs, including examples of how some states regulate MEWAs and how some states prohibit MEWAs Discuss federal-state coordination of enforcement efforts in the MEWA area and how these efforts may continue or change with association health plans Discuss pointers, potential pitfalls, and best practices when forming an association health plan

4 Executive Order Promoting Healthcare Choice and Competition Across the United States Orders the Administration to prioritize: Association Health Plans (AHPs) Limited-Duration Insurance Health Reimbursement Arrangements (HRAs)

5 Association Health Plans 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 rules expected later this year to be effective in 2019 much uncertainty still

6 An AHP is a Plan-MEWA But Expanded Relaxed and Recycled So what s new???

7 Whoa Nellie!!! Some basics first: 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 Is your MEWA a Plan or Non-Plan MEWA? - Wait, what?? - OK, let s back it up even further: ERISA applies to employee benefit plans To be an employee benefit plan, you need an employer sponsor this is where it gets really tricky 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 ) Digest that for a moment. Spoiler alert - the new AHP is a MEWA sponsored by one employer Non-Plan MEWA Proposed AHP (Plan MEWA) MEWA Current Plan MEWA

9 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 Group or Association of Employers as a Single Employer under ERISA Today the DOL views only a very small number of MEWAs at the plan-level and as sponsored by a single employer three general factors Bona fide group or association of employers not formed for purpose of obtaining insurance - pre-existing relationships 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 as a Single Employer under ERISA Executive Order challenges DOL to broaden the interpretation of ERISA Section 3(5) to include more arrangements as a single employer Proposed Regulations would broaden employer to include: Working owners (AHP can even be limited to working owners) Employers without any other connection within a geographic state or metropolitan area that covers more than one state Employers within the same industry without geographic restriction AHP Proposed Rules would expand number of Plan MEWAs

12 AHP as a Single Employer Although rules materially relax ERISA definition of employer, still designed to exclude commercial enterprises and adds additional requirements: 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 Working owners must show legitimate business and no other available group coverage DOL has requested comments Must meet certain nondiscrimination requirements

13 When the rules are finalized, Plan-level MEWAs sponsored by a bona fide group or association of employers must satisfy the rules for Qualifying AHPs for large group treatment. More guidance here would be helpful for other plan MEWAs (e.g. related employers not satisfying controlled group rules) Rules for non-plan MEWAs are not impacted. After Final Regulations Issued: Plan- MEWAs Qualifying AHP

14 Qualifying AHPs as plan level MEWAs will be exempt from the following PHSA requirements 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

15 Q. What are the non-discrimination requirements? A. 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 (including claims experience, for example) However, associations can set rates based on bona fide employment-based classifications (such as part-time or full-time), or based on geography or industry type

16 Health factors include health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability Prohibits discrimination in rules for eligibility, including rules for enrollment, effective dates, waiting periods, late and special enrollment, eligibility for benefit packages, benefits, continued eligibility and terminating coverage Permits treating participants as two or more distinct groups of similarly situated individuals if distinction is based on a bona fide employment-based classification consistent with employer's usual business practice Based on facts and circumstances, including whether employer uses classification for purposes independent of qualification for health coverage (e.g., determining eligibility for other employee benefits or other terms of employment) May be difficult to apply across all employer groups

17 Prohibits discrimination in premiums or contributions Example of permissible pricing variance: Proposed Regs Example 5. Association J sponsors a group health plan that is available to all members. According to the bylaws, membership is open to any entity whose principal place of business is in State K, which has one metropolitan area, the capitol of State K. Members whose principal place of business is in the capitol city of State K are charged more for their premiums. Example of prohibited pricing discrimination: Proposed Regs Example 4. Association G sponsors a group health plan, available to all employers doing business in Town H. Association G charges Business X more for premiums than it charges other businesses because Business X employs several individuals with chronic illnesses.

18 Qualifying AHPs as Plan MEWAs must also comply with the following ERISA requirements as a single employer Reporting and disclosure requirements i.e., SPD, SMM, Form 5500, SAR, Form M-1 (specific to MEWAs) Fiduciary responsibility provisions Administrative and enforcement provisions claims procedures, remedies available to participants and preemption provisions COBRA continuation provisions Health care provisions (HIPAA, Newborns Act, MHPA, MHPAEA, WHCRA, GINA, Michelle s Law, and ACA)

19 The purpose of the Form M-1 is to provide information about the MEWAs compliance with the health care provisions of ERISA The administrator/plan sponsor is responsible for filing the Form M-1 may be prepared by a TPA but must be signed by the plan administrator Form M-1 must be filed electronically using the Form M-1 Online Filing System Certain MEWAs are exempt Plans consisting solely of excepted benefits Governmental or church plans MEWAs that are insurance companies licensed to operate as a health insurance issuer in each state in which it offers medical coverage Entities that would not be a MEWA except for the 25% or more common control threshold Entities that provide coverage to employees of two or more employers due to a change in control Entities that cover non-employees (not greater than 1% of employees covered)

20 Other federal laws apply to Plan MEWA as single employer HIPAA s various requirements apply to MEWAs that offer medical benefits portability, special enrollment, nondiscrimination and special renewability, privacy and security rules COBRA for Plan Level MEWAs, the plan administrator is responsible for COBRA compliance and liability determined based on size of MEWA adds COBRA obligation for very small employers

21 State Regulation 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 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 Plan-level MEWA or Qualifying 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 may impose additional regulation on fully-insured MEWAs that are not Plan-level MEWAs. States can regulate the underlying insurance policies as to state-level mandates, etc. regardless of EBP status under ERISA Self-Funded MEWA states have broad power to regulate self-funded MEWAs, including Qualifying AHPs, regardless of EBP status as long as the law relates to insurance regulation and is not inconsistent with ERISA.

22 State Regulation State Law Example: Minnesota regulates MEWAs specifically and includes, but is not limited to, the following requirements:* minimum three-year commitment by participating employers; minimum requirement for 1,000 covered employees; Stop loss and insurance to prevent failures to pay; requirements for trust/funding/reserves; asset investment limitations; additional annual reporting requirements; requirement to use TPA licensed to administer health benefits, with TPA required to provide specific services; and a 2% revenue fee. * In 2017, Minnesota exempted certain MEWAs in the agricultural industry.

23 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

24 State Regulation Possible State actions to frustrate AHP Expansion: Increased restrictions and rules prohibiting self-funded MEWAs Creation of reinsurance/bail-out funds by additional fees on self-funded Qualifying AHPs Assessments on all Qualifying AHPs to shore up degradation of small-group/individual MKTs Imposing extra-territorial or state-level lookthrough rules for determining underwriting status (e.g. Mass prohibits small employers from forming large group MEWAs)

25 ERISA Preemption: States are generally free to regulate selffunded MEWAs under a 1983 amendment to ERISA in response to the prevalent MEWA abuses at that time limited only to the extent the regulation is inconsistent with ERISA. DOL has power under ERISA to claw back that preemption for Qualifying AHPs (i.e. MEWAs that are EBPs) and limit state regulatory authority on same basis as fullyinsured MEWAs that are EBPs (i.e. reserves, contributions or funding requirements). Preamble to proposed regulations suggest Administration may claw back ERISA preemption and assume more regulatory authority at the federal level utilizing increased enforcement powers under ACA.

26 State vs. Federal Regulation of Qualifying AHPs: MEWAs are a DOL enforcement priority EBSA investigates MEWAs that are unable to play claims due to funding deficiencies and inadequate reserves or where MEWA assets have been depleted through theft or excessive administrative fees EBSA also examines criminal activity related to MEWAs (i.e., mail fraud, wire fraud, bankruptcy fraud and other ERISA crimes) However, states currently are the primary regulators of MEWAs even though the ACA granted additional powers to the EBSA as described above. States are generally able to and do take quicker enforcement action to enforce their MEWA laws If DOL claws back preemption, the DOL could become the primary enforcer of MEWA compliance and consumer protections

27 Next Steps: Wait and See: regulations are still in proposed form and significant open questions on ultimate state vs. federal regulation. However, not to soon to Understand state laws in current form Analyze whether there are significant cost savings on a fully-insured basis taking into account fees, carrier overhead, conservative underwriting practices, etc. Analyze what changes in preemption could mean and whether it would make a selffunded QAHP a feasible option Consider impact of state extraterritorial or look-through requirements Be prepared to fully vet any self-insured QAHP as a participating employer to ensure proper protections are in place for benefit payments Be prepared to get a DOL advisory opinion on QAHP status preemption of unfavorable state laws for insured or self-insured depends on arrangement being determined by DOL as an EBP

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

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