Sweeping Changes Proposed DOL Expansion of AHC Sweeping Changes Proposed

Background ERISA applies to “employee benefit plans” To have an “employee benefit plan,” you need an “employer” sponsor An “employer” is defined in ERISA section 3(5) as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.” MEWA (ERISA plan) considered in 2010, but discarded as too risky in case the DOL were to publish opinion contrary to ours.

Implications of Current Law If eligible for large group plan treatment, then excepted from ACA’s small group market reform requirements, including: Community rating Premium rating restrictions of 3:1 Requirement to provide full suite of essential health benefits (“EHBs”) If subject to look-through treatment, then must apply ACA’s individual or small group market reform rules to each participant based on the participant’s own status as an individual (e.g., in case of sole proprietor with no common law employee) or small group (e.g., in the case of a participating small employer)

Proposed AHC Rule Issued on January 4th Creates class of AHPs that are entitled to large group plan status at the federal level Does so by reinterpreting the ERISA section 3(5) definition of “employer” to include a qualifying group or association of employers Compared to past guidance on what constitutes a “bona fide employer association,” materially RELAXES the rules for purposes of when an association can sponsor the new qualifying AHP and obtain large group treatment

Proposed AHC Rule CAN be offered (i) to employers within a geographically limited area across industries, or (ii) to employers in the same industry without geographic restrictions be offered (i) to employers within a geographically limited area across industries, or (ii) to employers in the same industry without geographic restrictions include (or even be limited to) sole proprietors, including those without any common law employees. (The NPRM refers to these individuals as “working owners”) be self-funded or fully insured MUST be sponsored by a qualifying group of employers or associations meet organizational requirements Meet control requirements Comply with certain nondiscrimination requirements

Implications of AHC Rule If the AHP meets all of the rules... Then it is treated as a large group plan at the federal level

Drilldown To whom can an AHP be offered? An AHP can be offered either to – Employers (including working employers) across industries so long as the AHP is geographically limited OR Employers (including working employers) within a specific industry without geographic limitation

Drilldown What type of associations can sponsor a qualifying AHP? The association must be an employer association rather than merely a membership organization (such as a Costco or AARP). What organizational and control requirements apply? The AHP must a formal organizational structure and must be controlled by the association’s or group’s employer members. What size employers can participate? There is no limit on the size of employers that can participate. Even sole proprietors who lack a common law employee can participate; however to be eligible to participate, the “working owner” must: Work at least 30 hours per or at least 120 per month providing personal services to the trade or business, OR Have earned income from such trade or business that at least equals the cost of coverage

Drilldown Are Qualifying AHPs subject to state regulation? Yes. The same extent of state regulation applies as MEWAs generally. If it is an insured AHP The AHP itself it is subject to direct regulation by the states regarding (i) reserves, and (ii) premium contributions. Additionally, the carrier and underlying insurance contract is subject to broad state regulation; however, it appears the scope of preemption in this respect is under review by DOL and the Administration. If it is a self-funded AHP, then subject to direct regulation by the states; however, it appears the scope of preemption in this respect is under review by DOL and the Administration

Drilldown Are insurance policies issued to Qualifying AHPs subject to state regulation? Yes. The same extent of state regulation applies to insurers currently. The insurer, would then be subject to direct regulation by the states. Examples could include state benefit mandates, “look through requirements”, or extraterritoriality rules. However, it appears the scope of preemption in this respect is under review by DOL and the Administration

Does Benefit Trust Want Back In? Next Steps It’s on a fast-track!! Comments were due to by March 6, 2018 AHP final rule is over at OMB for review. Could be a week or longer until we hear something. Final rule will likely NOT be effective until 60 days after Publication Stacey has been in conversation with Groom Law, Robert Northrop, Aetna and Cigna. Does Benefit Trust Want Back In?

New BT Plan? Fully Insured OR Self Insured Do we have an option? FBI’s Role Administrator? Marketing & Distribution? AGIA’s Role Licensing? Goal is to work out all options for BT to consider at July meeting so plan is ready for rollout as soon as regulation passes.