Acting Insurance Commissioner Comments on Proposed Rule on Association Health Plans

HARRISBURG, Pennsylvania, March 6 -- The Pennsylvania Insurance Department issued the following news release:

Acting Insurance Commissioner Jessica Altman today submitted comments on behalf of the Commonwealth of Pennsylvania on the federal government's proposed rule on the expansion of Association Health Plans (AHPs), highlighting several significant concerns about the proposed rule and offering recommendations to ensure that the final rule will include important consumer protections.

AHPs are health insurance plans for employees purchased through an association or group of multiple small employers, typically organized around a common professional interest. The proposed rule, released by the U.S. Department of Labor on Jan. 4, 2018, expands the definition of the term "employer" to give more employers the opportunity to form an association to buy insurance in the large-group market.

The proposed rule, a result of an earlier Executive Order, is aimed at small businesses and self-employed individuals as an alternative to purchasing insurance through the Affordable Care Act's (ACA) small-group or individual markets.

"It is a laudable goal to seek to increase access to affordable health coverage; however, we have concerns about increased potential for consumer harm both immediately, and in the near future, as the ripple effect of the proposed changes begin to affect market stability, insurers, and the provider community," Altman said. "The proposed rule, if finalized as drafted, would result in greater barriers to high-quality coverage and decreased affordability for many consumers."

The Pennsylvania Insurance Department has recommended that the federal government delay implementation of the final rule until 2020 at the earliest to give regulators, legislators, insurers, and other stakeholders an opportunity to prepare.

In her comments to the Department of Labor, Altman expressed concerns that the new rule could impact consumer access to quality, affordable coverage, the state's regulatory authority, and market stability.

"AHPs would not have to provide ACA-mandated minimum essential health benefits and prescription drug coverage requirements. That means individuals and families who make the switch to an AHP may not have access to basic services or critical care they need," Altman said. "And, although AHPs would have to comply with health-specific nondiscrimination provisions, the rule says nothing about protecting consumers based on gender, age, or industry."

"I'm also concerned that this new rule will destabilize the market. If Association Health Plans are exempt from state regulation and oversight, they could cherry-pick healthier risks. The rule could lead to younger, healthier consumers leaving the individual and small group markets, which would inevitably increase premiums for those still in those markets," Altman said. "We suggest that additional protections be included to ensure a level playing field for all and to minimize destabilizing the impact on the insurance market."

Pennsylvania does not expect the proposed rule to impact its state regulatory structure, allowing the Insurance Department to continue to protect Pennsylvania consumers under state law as it does currently.

Specifically, Pennsylvania law prohibits self-funded Multiple Employer Welfare Arrangements (MEWAs), including Association Health Plans, that offer coverage to employees of two or more unrelated employers and/or self-employed individuals. Under state law, associations may not be formed for the sole purpose of purchasing insurance or providing self-funded coverage, even though they would be allowed under the new federal rule. State law also requires that an association must have been in active existence for at least two years before offering coverage to its members. MEWAs have been subject to scrutiny on both the state and federal level in the past.

Still, as an added precaution, Altman recommended that the Department of Labor affirm that the rule does not limit the ability of states to regulate MEWAs, insurers offering coverage through MEWAs, and insurance producers marketing such coverage to employers.

"It is not sound public policy to create regulatory ambiguity that would invite associations to avoid effective regulatory oversight," Altman said. "Any attempt to call into question state laws that govern the formation and availability of Association Health Plans would put Pennsylvania consumers at risk."