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The Department of Labor (DOL) recently released a final rule that gives small businesses more freedom to join as a single group to purchase health insurance in the large group market or to self-insure. These arrangements are called association health plans (AHPs).
By forming AHPs, small employers can avoid certain Affordable Care Act (ACA) reforms that apply to the small group market. According to the DOL, this will provide small employers with more affordable health insurance options.
However, in exchange for lower premiums, AHPs may cover fewer benefits. Most AHPs will not be subject to the ACA’s essential health benefits reform, which requires that small group plans cover a core set of items and services, like mental health care and newborn care.
Employer Considerations Small employers may want to consider banding together to form an AHP as a more affordable health insurance option. Employers should carefully review the AHP’s benefit design to make sure it is appropriate for their workforce. Because AHPs are regulated at the federal and state level, the availability of these plans will also depend on a state’s regulatory approach.
Eligibility The final rule allows employers to form an AHP together that is a single ERISA plan if either of the following requirements is satisfied:
The employers are in the same trade, industry, line of business or profession; or
The employers have a principal place of business within a region that does not exceed boundaries of the same state or the same metropolitan area.