S. 1847 — Association Health Plans Act

This section revises the definition of "employer" under ERISA to treat a qualifying group or association of employers as a single employer for purposes of sponsoring an employee welfare benefit plan that is a group health plan, regardless of whether member employers are in the same industry, trade, or profession. (As background, ERISA distinguishes single-employer plans, which face fewer regulatory requirements, from multiple employer welfare arrangements.) To qualify under new subparagraph (B), the group or association must: (1) establish and maintain such a plan providing coverage to at least 51 employees (aggregated across all employer members); (2) have been actively in existence for at least two years; (3) have been formed and maintained in good faith for purposes other than providing medical care; (4) not condition membership or coverage on health status-related factors; (5) limit coverage to employees of employer members; (6) have a governing board with bylaws where at least 75% of members are duly elected employer participants; and (7) not be a health insurance issuer (or owned/controlled by one, except as a member). Qualifying groups also include those meeting criteria in prior advisory opinions or future regulations. New subparagraph (C) treats self-employed individuals (i.e., no common law employees, bona fide business owners earning wages or self-employment income while working at least 10 hours per week or 40 hours per month) as both employers eligible to join and employees eligible for coverage, subject to initial and ongoing eligibility monitoring by the group's board. New subparagraph (D) aggregates all employees (including self-employed individuals) across members and treats them as participants in a single plan. This section further specifies that providing such plan coverage does not constitute evidence of an employer or joint employer relationship under federal or state law. (Thus, qualifying associations may offer group health plans to small employers and self-employed individuals without triggering multiple employer welfare arrangement regulations or joint employer liability.)

This section establishes rules applicable to employee welfare benefit plans established and maintained by a group or association of employers described in ERISA section 3(5)(B) (i.e., association health plans). Specifically, such plans may (1) set base premium rates using an actuarially sound modified community rating methodology that pools all participant claims and (2) actuarially adjust each employer member's (i.e., employer with at least one common law employee or group of at least 20 self-employed individuals) contribution rates above or below the base rate based on the member's specific risk profile, to the extent not prohibited by state law. For plans consisting solely of self-employed individuals, all members must be treated as a single risk pool with uniform premium rates and pooled claims. The section further prohibits such plans from discriminating in eligibility, premiums or contributions, or coverage based on health status-related factors or pre-existing conditions (consistent with ERISA sections 702(a)(1), 702(b)(1), and PHS Act section 2704).

This section provides a rule of construction clarifying that nothing in the Act exempts a group health plan that is an employee welfare benefit plan offered through a group or association of employers from the requirements of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (ERISA; i.e., group health plan portability, access, and renewability requirements), including provisions of part A of title XXVII of the Public Health Service Act incorporated therein through ERISA section 715.