H.R. 1101 and Association Health Plans

Mar 20, 2017

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Employers with a small number of employees have provided health benefits using association health plans (AHPs) for decades. AHPs allow small employers to join together to buy health insurance, so their workers can gain access to the same pricing and coverage benefits enjoyed by large employers. Congress has a long history of support of AHPS. H.R. 1101, along with the proposed amendment, would clarify the use of AHPs.

Background of Association Health Plans

For years, employers have joined together to provide employee benefits. The reason is that multiple employers can form one large group and thereby receive cheaper costs for employee health benefits with less administrative overhead.

The government broadly defines these groups as multiple employer welfare arrangements (MEWAs) and AHPs fall under this heading. Congress set rules for the conduct of MEWAs, and specifically for AHPs, under the Employee Retirement Income Security Act (ERISA) of 1974.

Some of the initial AHPs were undercapitalized and were forced to close. This left employees without benefits. Because of fraud and abuse, Congress amended ERISA in 1982 and gave states some ability to regulate MEWAs. ERISA was again amended in 1996 and gave the Department of Labor oversight authority of essentially all MEWAs.

AHPs can be organized in two ways. A consolidated AHP is underwritten at the group level, where all employees from all employers are placed in one plan. An affinity AHP is underwritten at the individual employee level. This can save money if the AHP has a much higher percentage of young and healthy workers. Both consolidated and affinity plans can either self-insure or can purchase health insurance from a commercial insurance company.