Over the years, CAMFT members have expressed concerns about the cost of health plans and the quality of care they receive through them. Members have asked what CAMFT can do to support them in gaining access to products, services, and benefits that would help them address their need for affordable, high-quality health care. With this in mind, CAMFT has researched and monitored the viability of an association health plan (AHP), also referred to as a multiple employer welfare arrangement (MEWA).¹ This article will explain what an AHP is and why legal constraints prevent CAMFT from establishing one for its members.

What Is an Association Health Plan? An association health plan is a type of large group health insurance plan that enables employers, including the self-employed, to band together to offer health insurance coverage. AHPs are typically offered by, and designed for, those with a commonality of interest, and they are often able to offer better coverage options at lower cost than individual insurance plans and small group markets. This type of group medical insurance can be especially beneficial to the self-employed, who would otherwise not have access to large group markets that result in health care cost savings. The cost savings to AHP participants reportedly fall between eight and 18 percent.² Those savings, along with the ability to tailor benefits, make AHPs an attractive option to members of organizations like CAMFT. Unfortunately, the uncertainty of federal laws governing the regulation of AHPs, as well as California’s strict constraints on AHPs within the state, prohibit CAMFT from establishing an AHP for its members at this time.

Federal Law Constraints
On October 12, 2017, President Trump signed Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” to “facilitate the purchase of insurance across state lines and the development of a healthcare system that offers more Americans high-quality care at affordable prices.” The order directed the Secretary of Labor to propose regulations that would expand access to health coverage by allowing more employers to form AHPs and offer group health coverage. These regulations were intended to “avoid many of the Affordable Care Act’s costly requirements.”3 Under previous laws and restrictive guidelines, few associations met the criteria for sponsoring AHPs.

In June 2018, the Trump administration issued its final rule regarding AHPs.⁴ The revised rule removed restrictions on the establishment and maintenance of AHPs under the Employee Retirement Income Security Act (ERISA), which once prohibited groups from forming and existing for the sole purpose of offering health coverage. Specifically, these revised regulations allowed employers to join together for the express purpose of offering health coverage if they 1) are in the same trade, industry, line of business, or profession, or 2) have principle places of business within a region that does not exceed the boundaries of the same state or the same metropolitan area. The rule also expanded the definition of employer to include “working owners” or owners without common-law employees. AHPs that met the regulations’ employer conditions were able to offer employer members, and those employer members’ employees, a single large group health plan.

However, the loosening of restrictions on the formation of AHPs was short-lived. Eleven states and the District of Columbia sued the U.S. Department of Labor arguing that it exceeded its statutory authority and that the AHP final rule’s provisions regarding bona fide associations and working owners were in conflict with the Affordable Care Act (ACA) and ERISA. In 2019, the U.S. District Court for the District of Columbia struck down these major provisions of the AHP final rule citing concerns about the test for bona fide associations and the expansion of the definition of employer. The Trump administration then appealed the decision to the U.S. Court of Appeals for the D.C. Circuit.

The Biden administration, which has yet to take action on the issue, could either rescind the Trump rule or propose a new regulation. While the federal government’s stance on AHPs and MEWAs is unclear, the future of these sorts of entities in California looks bleak. California law takes precedent, as the Department of Labor has not changed states’ authority to regulate AHPs and MEWAs.

California Law Constraints
California law significantly limits the extent to which employers and individuals may join together to purchase health care coverage as an association. In 1995, the state legislature authorized self-insured AHPs, but it also placed a restriction on the formation of new AHPs after 1995.⁵ California’s concerns stem from AHPs’ poor record in the state: Some plans have faced allegations of fraud and experienced fiscal insolvency to the point that they were unable to pay consumer claims.

In 2019, the Department of Managed Health Care (DMHC) sent out an All Plan Letter reminding health plans, solicitors, brokers, and others that in California large group coverage cannot be sold to individuals or small employers via an AHP and that the federal regulations regarding AHPs as mentioned above do not abrogate California’s law regarding associations.⁶

In 2021, the state legislature created two pathways for obtaining an exemption from existing law that prohibits individuals and small employers from purchasing large group coverage through an AHP.⁷ The California Department of Insurance⁸ and the California Department of Health Care Services⁹ recently offered guidance regarding the legislation. Unfortunately, neither pathway is a viable avenue for CAMFT because a condition for exemption under both pathways is that the AHP must have been established prior to March 23, 2010.

How Other Associations Offer This Benefit
Since some state associations, such as the California Association of Realtors (CAR), and some national associations, such as the American Psychological Association (APA), offer their members the benefit of large group health insurance through AHPs, CAMFT members may mistakenly believe that our association can, as well. The CAR insurance plan was established in 1994, prior to the state’s ban on AHPs—their association was essentially grandfathered into the law and permitted to continue to offer one. And the APA’s Health Insurance Marketplace is governed by the laws of another state that does not have the same restrictions that California does.

Conclusion
CAMFT is committed to developing and maintaining products, services, and benefits that support our members. CAMFT will continue to monitor any developments in federal and state law related to the establishment of AHPs and keep our members apprised of this important issue.

Sara Jasper, JD, CAE, is a staff attorney for CAMFT. Sara is available to answer member calls regarding legal, ethical, and licensure issues.

Endnotes:

¹ As defined by the Employee Retirement Income Security Act of 1974 (ERISA), a multiple employer welfare arrangement (MEWA) is the basis for a group health insurance plan that provides coverage to the employees of two or more employers not under common control.
² This cost savings information is offered by Association Health Plans, Inc.
³ Exec. Order 13813, 82 Fed. Reg. at 48385.
⁴ See Federal Register, “Definition of ‘Employer’ Under Section 3(5) of ERISA-Association Health Plans”—AHPs are described in the rule as a type of MEWA.
⁵ Cal. Ins. Code § 742.24(h).
⁶ See https://www.dmhc.ca.gov/Portals/0/Docs/OPL/APL%2019-024%20(OLS)%20%20Association%20Health%20Plans%20.pdf?ver=2021-05-07-095619-167.
⁷ Cal. Senate Bill 326 (Pan) and Cal. Senate Bill 718 (Bates).
⁸ See http://www.insurance.ca.gov/0250-insurers/0500-legalinfo/0200-regulations/HealthGuidance/upload/MEWA-Guidance-SB326-SB718-1.pdf.
⁹ See https://www.dmhc.ca.gov/Portals/0/Docs/OPL/ APL%2022-012%20%20Section%201357_503%20 Compliance%20and%20MEWA%20Registration%20(3_24_22). pdf?ver=2022-03-24-160700-887.

This article is not intended to serve as legal advice and is offered for educational purposes only. The information provided should not be used as a substitute for independent legal advice and it is not intended to address every situation that could potentially arise. Please be aware that laws, regulations and technical standards change over time. As a result, it is important to verify and update any reference or information that is provided in this article.