NSBA Comments on AHP Rule 

March 7, 2018

NSBA recently submitted comments with respect to the proposed rule issued in the Federal Register on January 5, 2018: “Definition of ‘Employer’ under Section 3(5) of the Employee Retirement Income Security Act (ERISA) —Association Health Plans (AHPs).”

In January, the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL) published a proposed rule that would broaden the criteria under the ERISA for determining when employers may join together an employer group or association that is treated as the “employer” sponsor of a single multiple-employer group health plan. The proposed rule would modify the definition of “employer,” in part, by creating a more flexible “commonality of interest” test for the employer members than DOL had adopted in previous interpretive rulings.

The proposed rule was developed in response to President Trump’s recent executive order that directed the federal government to expand access to AHPs and other types of insurance products or arrangements, such as short-term limited duration insurance and health reimbursement arrangements. In his executive order, President Trump directed the Secretary of Labor to issue regulations to allow more employers to form AHPs. In particular, the Department was asked to reconsider its definition of “employer” under ERISA and identify ways to promote AHP formation on the basis of common geography or industry.

In the comment letter, NSBA emphasizes that the necessary level of cost relief can only be achieved through a broad reform of the current health care system with a goal of reducing the cost of coverage, providing universal access, focusing on individual responsibility and empowerment, creating of the right market-based incentives, and a relentless focus on improving quality while driving out unnecessary, wasteful and harmful costs. However, some improvements can undoubtedly be made through administrative action, so the Department is to be commended for exploring potential reforms.

NSBA’s comments had a twin purpose. First, NSBA intended to make suggestions that help to ensure that AHPs can meaningfully live up to their purpose, providing greater choice and access to smaller companies and their employees by driving down costs and creating more competitive choice. Second, NSBA’s comments were directed at ensuring that the millions of smaller companies not purchasing coverage through an AHP do not see their insurance costs further escalate as a result of selection issues that create price disparities based on health status rather the reduction of actual health care costs. This potential for “cherry-picking” has been the central conundrum throughout the long AHP debate, and it is crucial that these rules address this issue as fully as possible.

Further, NSBA believes that proposals to create AHPs should focus on their potential to reduce regulatory burdens and increase choice, but avoid creating scenarios where the AHPs are merely given tools to manage (and reduce) their risk. Shifting risk is a zero-sum game where one company wins because another loses. However, lifting unnecessary and burdensome regulations, inducing competition around real health care costs and creating greater transparency and access through competition can create a virtuous cycle where the entire small employer market can benefit.

Please click here to read NSBA’s full comment letter.