The Department of Labor published a final rule on June 21, 2018 creating flexibilities for employers and working owners
to band together to sponsor a single Association Health Plan (AHP). The final rule allows multiple employers to jointly
sponsor a single group health plan by expanding ERISA’s definition of “employer.” An AHP may provide coverage to the
owners and employees of participating employers and their families.

By collectively forming a single plan, multiple employers may avoid small group market rating, maintain greater flexibility in
benefits, and reduce premiums and administrative expenses. An AHP is a multiple employer welfare arrangement (MEWA)
and is subject to the same federal and state rules as any other MEWAs.

Applicability of the Final Rules

The Department outlines a rolling applicability period (i.e., effective dates) in order to allow states time to modify and/or
implement rules in reaction to the federal changes.

• All associations (new or existing) may establish a fully insured AHP on September 1, 2018.
• Existing self-insured association programs established before June 21, 2018 and comply with federal rules prior to
the final regulations, may rely on these rules January 1, 2019.
• New self-insured AHPs formed pursuant to this rule may rely on the guidance as of April 1, 2019.

Any AHP arrangement permitted before the final rules will remain valid. The final rules merely relax the definition of
“employer” allowing more arrangements to qualify as a single plan.

Under existing law, most existing association programs do not qualify as a “single plan” under ERISA and each employer
accessing coverage through the arrangement is treated as a single ERISA plan. This also means the size of each
employer (and not the aggregate size of the plan) controls how the plan is rated by insurance companies for purposes
of premiums and benefits. For example, an insured association plan with an employer that has 30 employees would be
required to comply with the ACA’s small market rules (e.g., EHBs, age-banded rates, bronze level of coverage) even if,
when looked at in the aggregate, the number of employees getting coverage through the association would otherwise
qualify as a “large group.”

Nothing in these rules change any existing state laws that may impose limitations, restrictions or prohibitions on creating
these arrangements on a fully insured or self-funded basis. So, while federal law has become more relaxed, it will be up to
each state (and applicable carriers) whether to follow along.

Ahp Formation

A bona fide group or association (“association”) may form an AHP if:

• all employer members are engaged in the same trade, industry, line of business, or profession; or
• have a principle place of business in the same state or metropolitan area.

The association sponsoring the AHP must be a viable entity in the absence of providing health coverage and demonstrate
a substantial business purpose for existing such as educating its members or promoting an industry. The rules specifically
exclude certain entities from controlling an AHP including a health insurance issuer, subsidiary or affiliate, a provider
network, health care organization, or other part of a health delivery system.

Association members must sufficiently control the association and the AHP in form and substance, but not necessarily
conduct the day-to-day affairs. Members may demonstrate sufficient control over the AHP by regularly nominating and
electing the officials who operate the governing body, retaining authority to remove those officials with or without cause;
and maintaining approval and veto power over decisions regarding plan design, amendments or plan termination.


Cosmo Insurance Agency is an independent insurance agency serving surrounding communities in New Jersey. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating the latest in technology-based tools and laws on healthcare, employee benefits, life insurance and finance, we keep our clients up-to-date with the plans that encompass all of their needs, whether it is individual or group insurance. 


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