House Education & the Workforce Committee Issues Report on Association Health Plans Act
Here are excerpts:
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Purpose
There is an urgent need to address health care challenges facing working families and small businesses. Democrat policies, like Obamacare, have sold Americans a faulty bill of goods and led to consolidation in the marketplace, skyrocketing premiums, and a broken individual health market that costs taxpayers more than a trillion dollars while covering only 9 percent of the population.
H.R. 2868, the Association Health Plans Act, amends the Employee Retirement Income Security Act of 1974 (ERISA) to improve access to affordable health coverage options for workers employed by small businesses. The bill amends ERISA to authorize the creation of association health plans (AHPs) sponsored by groups or associations of employers. The legislation allows small businesses and self-employed individuals to band together across state lines through associations, thus increasing their bargaining power with plans and providers and placing them on a more level playing field with larger companies and unions. H.R. 2868 frees small businesses from costly state-mandated benefit packages, spreads risk for self-employed individuals, and lowers overhead costs, enabling employers to offer more affordable health care coverage to their workers and enabling self-employed individuals to access more affordable health care coverage.
Committee Action
109TH CONGRESS Legislative Action
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/1/H.R. Rep. No. 109-41 (2005).
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111TH CONGRESS Legislative Action
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/2/H.R. 3200 was the House precursor to the law known as the Affordable Care Act.
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/3/
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/4/Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (2010).
/5/Health and Education Reconciliation Act, Pub. L. No. 111-152 (2010).
/6/Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (2010), and Health and Education Reconciliation Act, Pub. L. No. 111- 152 (2010).
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112TH CONGRESS First Session--Hearing
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115TH CONGRESS First Session--Hearings
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Legislative Action
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/7/H.R. 1101, 115th Cong. (2017).
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/8/H.R. 1101, Small Business Health Fairness Act of 2017: Markup Before the H. Comm. on Educ. & the Workforce, 115th Cong. (
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Second Session--Hearing
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117TH CONGRESS First Session--Hearing
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Second Session--Hearing
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118TH CONGRESS First Session--Hearing
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Committee Views
INTRODUCTION
Background on employer-sponsored insurance coverage
Since World War II, employers have offered health care benefits to recruit and retain talent and to ensure a healthy and productive workforce. Employer-sponsored health insurance covers almost 159 million American workers and family members./9/ According to the
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/9/Kaiser Family Found., Employer Health Benefits: 2022 Annual Survey, 2022
/10/
/11/Kaiser Family Found., supra note 9, at 12.
/12/Id.
/13/Id.
/14/Id.
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Employer-provided health benefits are regulated by a number of laws, including ERISA as amended by the ACA. DOL implements and enforces ERISA. By virtue of its jurisdiction over ERISA, the Committee has jurisdiction over employer-provided health coverage.
Small and large employers offer health care coverage to employees in self-funded arrangements (self-insurance) or purchase fully insured plans. ERISA regulates both fully insured and self-insured plans, but only self-insured plans are exempt from a patchwork of benefit mandates imposed under state insurance law. Employers sponsoring self-insured plans are not subject to the same requirements under the ACA as those with fully insured plans. Therefore, employer-provided plans have different requirements and costs depending on funding arrangements. Last year, approximately 65 percent of workers with employer-sponsored health coverage were enrolled in a self-funded plan, up from 44 percent in 1999 and 55 percent in 2007./15/
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/15/Id. at 157.
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Obamacare has failed, proving the need for a better way of providing access to affordable, quality health care The ACA attempted to expand access to health insurance through a complicated structure of federal subsidies, Medicaid expansion, and new rules governing health insurance markets. The law has severely damaged America's health care system and is collapsing under its own weight. For example,
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/16/
/17/Rescuing Americans from the Failed Health Care Law and Advancing Patient-Centered Solutions: Hearing Before the H. Comm. on Educ. & the Workforce, 115th Cong. 42 (2017) (statement of
/18/Small Bus. for Am. Future, Survey: Health Care Costs Putting Financial Pressure on Small Business (
/19/
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The ACA placed additional mandates and administrative burdens on employers, increasing the cost of insurance coverage and making it more difficult to hire workers and grow their businesses. According to a study by the
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/20/
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In the aftermath of ACA, approximately 36 percent of small businesses with fewer than 10 employees stopped offering coverage, leaving workers with even fewer health care options./21/ In 2021, the offer rate for businesses with fewer than 50 employees had dropped to 31.9 percent, compared with 39 percent in 2010 when ACA passed./22/ Due to their size and economies of scale, large businesses and labor organizations have the ability to negotiate on behalf of their employees for high-quality health care at more affordable costs. By offering a qualified group health plan under ERISA, these large employers and labor organizations are also exempt from myriad state rules and regulations on health insurance. Small businesses, however, do not have the same bargaining power as larger businesses and are unable to band together to increase their bargaining power in the health insurance marketplace.
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/21/
/22/
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According to a survey released by the
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/23/
/24/Reducing Health Care Costs for Working Americans and Their Families: Hearing Before the Subcomm. on Health, Employment, Labor & Pensions of the H. Comm. on Educ. & the Workforce, 118th Cong. (2023) (statement of
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One significant factor contributing to the high cost of health care for small employers is their inability to band together to unlock the financial benefits of small business pooling arrangements. These cost-saving benefits--economies of scale, freedom from state regulation, and increased administrative efficiencies--would help small employers access coverage at a more affordable price and decrease the number of uninsured individuals who work in small businesses. That is particularly important because, as stated above, the percentage of smaller firms that offer coverage has fallen from 39 percent to 31.9 percent since 2010.
To address the damage to small business caused by the ACA,
The need for small business pooling
AHPs will give small businesses another option for offering health insurance coverage. In a statement submitted to the HELP Subcommittee, 18 organizations comprising the
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/25/Id. (statement of
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AHPs allow small businesses to pool risk.
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/26/Id. (White statement).
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A key element of H.R. 2868 is that AHPs would have the ability to self-fund, which in turn would allow small businesses to band together across state lines to offer coverage. Self-insuring also allows employers to offer plans designed to meet the needs of their employees while controlling costs. These plans provide excellent, well-regulated benefits. As
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/27/Id. (White statement).
/28/Legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families: Hearing Before the H. Comm on Educ. & the Workforce, 115th Cong. 42 (2017) (statement of
/29/Id. at 43.
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Some states already allow pooling arrangements within their state. AHPs remain subject to all federal and state laws otherwise applicable to such plans, and the provisions of H.R. 2868 are not intended to modify the application or interpretation of such laws to such plans.
On
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/30/Definition of "Employer" Under Section 3(5) of ERISA-- Association Health Plans, 83 Fed. Reg. 28,912 (
/31/New York v. DOL, 363 F. Supp. 3d 109 (D.D.C. 2019).
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In the brief period before the rule was blocked by the district court, 28 new AHPs were established. Due to the short period these plans were operating, little data is available. However, reported savings for the plans averaged 29 percent for self-funded AHPs and 23 percent for fully insured AHPs./32/
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/32/
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The federal government's attack on small business owners
On
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/33/Letter from
/34/Press Release, Governor Glenn Youngkin Signs Bipartisan Legislation To Expand Health Care Coverage Options For Virginia's
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Support for creating options and flexibility for small businesses
Because it benefits both employers and working families, AHP legislation has been consistently supported over the years, including by a broad swath of groups representing job creators, including: the
H.R. 2868,
The Committee is advancing this legislation to expand access to more affordable health care coverage for small employers and self-employed individuals by authorizing the creation of AHPs sponsored by groups or associations of employers, including self-employed individuals. The legislation allows small businesses and independent contractors to band together across state lines through associations for their workers, thus increasing their bargaining power with plans and providers and placing them on a more level playing field with larger companies and unions. H.R. 2868 frees small businesses from costly state-mandated benefit packages, spreads risk for self- employed individuals, and lowers overhead costs, enabling employers to offer more affordable health care coverage to their workers and self-employed individuals to access more affordable health care coverage.
CONCLUSION
H.R. 2868, the Association Health Plans Act, makes it easier for small businesses to promote a healthy workforce and offer more affordable health care coverage. By allowing small businesses to join together in AHPs, the bill puts smaller businesses on a more level playing field with larger companies and unions, and it increases their bargaining power with insurance providers. More importantly, it provides smaller employers--many of whom have limited resources--with a greater opportunity to offer their workers quality and affordable health care coverage. If enacted, H.R. 2868 will empower small businesses to provide quality health care for their employees and independent contractors to obtain quality affordable health care coverage.
Summary
H.R. 2868 SECTION-BY-SECTION SUMMARY
Section 1. Short title
Section 1 provides that the short title is "Association Health Plans Act."
Section 2. Treatment of group or association of employers
Section 2 amends the definition of "employer" under ERISA to confirm that a group or association of employers--regardless of profession or geography--may be considered a single large employer if the group or association:
Establishes a group health plan;
Includes at least 51 employees;
Has been actively in existence for a minimum of two years;
Has been formed in good faith for a purpose other than purchasing insurance;
Has no membership restrictions based on health status-related factors;
Makes coverage available to all employees regardless of health status;
Does not offer coverage to anyone outside the group or association;
Has established a governing board with at least 75 percent of board members being duly elected by the employer members participating in the health plan; and Is not a health insurance issuer itself or controlled or owned by a health insurance issuer or its subsidiary.
For purposes of determining whether the group or association includes at least 51 employees, all employees of employer members of the group or association are aggregated and treated as being employed by a single employer.
Grandfather clause and additional pathways
Section 2 grandfathers existing AHPs by allowing a group or association to be considered an "employer" for purposes of sponsoring an ERISA-covered health plan if the group or association (1) satisfies criteria outlined in DOL advisory opinions issued prior to the enactment of H.R. 2868 or (2) satisfies any criteria in prospective DOL regulations.
Section 2 allows self-employed individuals to participate in an ERISA-covered health plan established by a group or association by treating a self-employed individual as an "employer" and an "employee" as well as a "participant" in the health plan. For these purposes, a self-employed individual:
Does not have any common-law employees;
Has ownership right in a trade or business;
Earns wages or income from this trade or business; and
Works at least 10 hours per week or 40 hours per month.
Section 2 requires that all AHPs have established a governing board with at least 75 percent of board members duly elected by the employer members participating in the health plan. The board shall (1) determine whether a self-employed individual satisfies the criteria to join a group or association prior to the individual enrolling in the health plan and (2) periodically monitor whether an individual continues to be considered a self-employed individual. If the board determines that a self-employed individual no longer satisfies the criteria, the individual and their dependents will no longer be eligible for coverage (other than COBRA continuation coverage, if applicable) starting in the next plan year, although an individual has the right to provide evidence that he or she continues to meet (or subsequently meets) the criteria to maintain or restore coverage.
Section 2 also clarifies that participation in an ERISA- covered plan sponsored by a group or association of employers is not evidence of joint employment.
Section 3. Rules applicable to employee welfare benefit plans established and maintained by a group or association of employers Section 3 requires that premiums and underwriting be based on the risk pool of employer groups instead of on an individual level. A group or association of employers made up solely of employers with at least one common-law employee (i.e., a group or association with no self-employed individuals) may develop premium rates in the following manner:
a. Establish premium rates after considering the collective health claims experience of all employees and their dependents participating in the plan.
b. Vary rates up or down for each individual employer member of the group or association based on the collective health claims experience of the employees employed by each respective employer.
A mixed group or association of employers that includes both employers with at least one common-law employee and self- employed individuals may develop premium rates in the same manner as above. However, for purposes of varying the premiums by the employer member, all self-employed individuals must be aggregated and counted together as their own single group made up of at least 20 self-employed individuals. Any premium variation for this self-employed individual group shall consider the collective health claims experience of all self- employed individuals and their dependents in this group.
For a group or association of employers made up solely of self-employed individuals (i.e., a group or association with no employers with at least one common-law employee), premium rates will be developed by considering the collective health claims experience of all the self-employed individuals and their dependents participating in the plan. The base rates will then be charged equally to all self-employed individuals and their dependents participating in the plan. If the aggregated group of self-employed individuals is less than 20 individuals, this group or association cannot permit self-employed individuals to participate in the plan.
Section 3 reconfirms current law and reiterates that an ERISA-covered health plan shall: not establish a rule for eligibility or continued eligibility in the health plan that discriminates against any participant based on a health status- related factor; not require any participant to pay a premium rate that is higher than the premium rate similarly situated individuals pay based on a health-status-related factor relating to that participant; and not deny coverage based on a pre-existing condition.
Section 4. Rules of construction
Section 4 confirms current law and requires an ERISA- covered health plan to comply with the ACA's group health plan coverage requirements and ERISA's coverage requirements.
Explanation of Amendments
The amendments, including the amendment in the nature of a substitute, are explained in the body of this report.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a description of the application of this bill to the legislative branch. H.R. 2868 takes important steps to expand access to affordable, high-quality healthcare coverage for small employers and self-employed individuals.
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104-4) requires a statement of whether the provisions of the reported bill include unfunded mandates. This issue will be addressed in the CBO letter.
Earmark Statement
H.R. 2868 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9 of House rule XXI.
Roll Call Votes
Clause 3(b) of rule XIII of the Rules of the
Statement of General Performance Goals and Objectives
In accordance with clause (3)(c) of House Rule XIII, the goal of H.R. 2868, the Association Health Plans Act, is to improve access to affordable health coverage options for workers employed by small businesses.
Duplication of Federal Programs
No provision of H.R. 2868 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from the Government Accountability Office to
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) of rule X of the Rules of the
Required Committee Hearing and Related Hearings
In compliance with clause 3(c)(6) of rule XIII the following hearing held during the 118th
With respect to the requirements of clause 3(c)(2) of rule XIII of the Rules of the
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of the
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
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MINORITY VIEWS
Introduction
Committee
Before the Affordable Care Act (ACA),/1/ workers often had limited options for obtaining affordable health coverage./2/ People with preexisting conditions were particularly disadvantaged, because they could be charged higher rates or denied coverage altogether in the individual market. Small businesses employing women or workers with chronic or high-cost illnesses could be charged higher premiums, often making coverage unaffordable. Those who could afford to buy coverage in the individual and small group market often found their insurance did not cover vital services, such as behavioral health or maternity care./3/
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/1/Pub. L. No. 111-148 (2010).
/2/
/3/Center on Budget and Policy Priorities, Essential Health Benefits Under Threat, https://www.cbpp.org/essential-health-benefits- under-threat (last visited
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The ACA took steps to level the playing field--establishing safeguards for workers and employers alike. The ACA created Marketplaces where individuals, self-employed people, and families can access affordable health coverage, and the law has also protected workers and businesses in the small group market from unfair practices./4/ Consumers have benefited from these protections for over a decade despite dozens of attempts to undermine this progress through Republican votes to repeal the ACA in
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/4/
/5/
/6/Laurie Sob el et al., Explaining Litigation Challenging the ACA's Preventive Services Requirements: Braid wood
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In addition to instituting crucial consumer protections, the ACA has led to historic improvements in the number of people with health coverage. In 2022, the uninsured rate fell to 8 percent--the lowest level in history./7/ During the 117th
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/7/
/8/Pub. L. No. 117-2 (2021).
/9/Pub. L. No. 117-169 (2022).
/10/
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While health care costs for many workers and businesses remain a challenge, association health plans (Apes) are not the answer. Apes are arrangements sponsored by small employer groups or individuals to provide health insurance to their members outside the traditional small group and individual market. Expanding these arrangements, as proposed under H.R. 2868, threatens to harm workers and small businesses by making coverage more expensive for many and entirely out of reach for some. In the
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/11/Reducing Health Care Costs for Working Americans and Their Families: Hearing Before the Subcomm. on Health, Empl., Lab., and Pensions of the H. Comm. On Educ. & the Workforce, 118th Cong. 10 (2023) (testimony of
/12/Patient community concerns about the detrimental impact of policies included in HR 2868, the Association Health Plans Act; HR 824, the Telehealth Benefit Expansion for Workers Act; and HR 2813, the Self-Insurance Protection Act, Letter to Chair
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H.R. 2868 Recycles Failed Republican Policies
Under current law, coverage offered through a group or association to individuals or small employers must generally comply with the patient protections of the ACA and state insurance law./13/ However,
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/13/29 U.S.C. Sec. 1144(b)(6);
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Expansion of AHPs has been central to the Republican health care agenda for decades, most recently in Republican attempts to repeal the ACA./14/ In 2017, the Committee marked up H.R. 1101, the Small Business Health Fairness Act, which would have expanded AHPs in a manner that would undermine important consumer protections. At the time, Committee Republicans described this legislation as a key component of their plan for "repealing and replacing Obamacare in the 115th
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/14/See, e.g., H.R. 1136, Affordable Health Care Act of 1999 (106th
/15/H. Rep. 115-43 at 24 (2017).
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Since
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/16/
/17/Pub. L. No. 93-406 (1974).
/18/New York v. United States Dep't of Lab., 363 F. Supp. 3d 109, 117 (D.D.C. 2019).
/19/Id.
/20/Id. at 141. Note that the ruling was appealed to the
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Having failed time and again in their efforts to expand AHPs, Committee Republicans have now put forward H.R. 2868 in yet another attempt to achieve this goal. Under this legislation, ERISA's standards would be eroded such that sole proprietors with no common law employees would be considered "employers," and AHP arrangements would be able to evade many of the consumer protections that would otherwise apply to the individual or small group market. In addition, the bill would treat AHPs as ERISA-covered group health plans exempt from state law, thereby circumventing the authority of state insurance regulators.
H.R. 2868 Creates Market Fragmentation and Raises Health Care Costs Under the ACA, health insurance sold through an association to individuals and small employers generally must meet the same standards that apply to coverage sold in the individual and small group market./21/ However, by allowing small employers and individuals to instead be subject to requirements applicable to large employers, H.R. 2868 unravels these protections and allows association health plans to operate under different rules.
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/21/
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Experts have consistently warned that this approach--which is antithetical to the foundational principles of the ACA that ensure no one gets left behind--would fragment the health insurance market. According to the
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/22/
/23/Cong. Budget Office, How CBO and JCT Analyzed Coverage Effects of New Rules for Association Health Plans and Short-Term Plans 5 (
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H.R. 2868 Threatens Comprehensive, Affordable Coverage Under H.R. 2868, AHPs could evade state and federal benefit standards and consumer protections, threatening the quality of coverage provided to their own enrollees. As a result, enrollees run the risk of--potentially unknowingly--losing out on comprehensive care that would otherwise be guaranteed under the ACA and state law. While the bill applies some superficial consumer protections to AHPs (e.g., nominal protections against discrimination based on preexisting conditions), it creates other large loopholes that leave consumers vulnerable.
Disturbingly, this legislation explicitly authorizes AHPs to set premiums based on the "specific risk profile" of employer members, enabling AHPs to charge higher premiums to groups based on their age, gender, or other factors. Moreover, even if premiums are not set directly on health-related factors by an association, under this bill, premiums could take into account numerous other factors that raise costs for people who are older or have preexisting conditions./24/ As a result, this bill would all but invite AHPs to charge workers with more expensive health needs far higher premiums--if those workers could even afford to participate in the associations at all.
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/24/See
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Allowing insurers and health plans to avoid covering needed benefits is a longstanding tenet of
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/25/See e.g.,
/26/
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H.R. 2868 Gambles With the Financial Security of Workers, Employers, and Providers H.R. 2868 allows AHPs to evade state regulations that prevent fraud and mismanagement. This is profoundly dangerous for consumers and employers who participate in these arrangements, as well as the doctors, health centers, and hospitals who may not receive reimbursement for the medical care they provide.
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/27/Corlette, supra note 11 at 10.
The history of multiple employer welfare arrangements (MEWAs) offers a sobering warning for the financial risks posed by the proliferation of AHPs. H.R. 2868 allows AHPs to form under limited regulation and oversight, hearkening back to the time when MEWAs also enjoyed limited regulation and gambled with the financial security of both workers and employers./28/ In 2001,
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/28/
/29/
/30/Id.
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Unfortunately, MEWAs continue to face financial challenges and heightened risk of fraud to this day.
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/31/
/32/Press Release,
/33/Monahan, supra note 29.
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Democratic Amendments Offered During Markup of H.R. 2868 Committee Democrats put forward four amendments to improve the bill. These amendments would have ensured that AHPs would have to cover benefits provided by plans in the ACA-compliant small group and individual market and would have protected consumers from other potential harms that could result from enactment of this legislation.
Committee
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Amendment Offered By Description Action Taken --
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Conclusion
H.R. 2868, the Association Health Plans Act, would erode the protections in the ACA and leave small businesses and their workers vulnerable to unaffordable health coverage and fewer benefits. The expansion of AHPs will threaten affordable coverage for those outside of the associations while failing to provide comprehensive, reliable coverage to their own enrollees. This misguided legislation is simply a recycled attack on affordable health care and yet another effort to roll back the historic progress made under the ACA.
For the reasons stated above, Committee Democrats unanimously opposed H.R. 2868 when the
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The report is posted at: https://www.congress.gov/congressional-report/118th-congress/house-report/112/1
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