A Doctor, a Lawyer, and a Car Salesman walk into a Bar…

…and they ask the bartender, “want to start a health plan together?” In the past, this would have been a non-starter. When the insurance agent showed up late, he would have told the others that employers cannot just come together for the purposes of offering health insurance to their employees. But that may be changing with the Trump administration’s release of new Association Health Plan rules.

Association health plans have always been legal, but they have been difficult to create and administer – primarily due to onerous Federal regulations and complicated/difficult underwriting challenges for insurance carriers. Also, the entity that “sponsors” the plan had to exist for a reason other than offering health insurance. So employers had to be part of some other type of organization that had an interest in taking on this monumental task.

The new rules relax some of these requirements – notably, the restriction on the entity existing for a reason other than offering benefits. The new rule says that the association must have at least one substantial business purpose other than unrelated to the provision of benefits, although the principal purpose may be the provision of benefits.

There is a commonality of interest test. It can be satisfied if the employers are of the same industry, trade, line of business or profession, or the same geographic location. The same geographic location includes the same state or metropolitan area. It could also mean the same Metropolitan Statistical Area or a Combined Statistical Area as defined by the OMB. This means employers could band together on a national basis as long as they are in the same industry, trade, line of business or profession and meet the other outlined requirements.

There will still be challenges. Some states have regulations that prohibit some of the actions allowed by the new rules. There is little guidance so far on whether the new rules would preempt state laws. Also, just because employers can find a few other businesses who wish to band together to offer a health plan, there’s no guarantee they will be able to find a willing insurance company (or a broker sharp enough to lead them through the process).

Want to learn when the new rules take effect, and how we’re preparing to help employers evaluate their options? Give us a shout at bayoubenefits@gmail.com