United States: Association Health Plans: Benefit Of The Future Or Blast From The Past?

As "gig" employment becomes more prevalent, many organizations are seeking to differentiate themselves from other similar companies by offering their contract workers benefits.  Unfortunately, federal guidelines make it challenging to offer health benefits to independent contractors or non-employees.  That's why many organizations, trade associations and small employers became interested when the Trump administration suggested it would rewrite rules relating to so-called "association health plans," hoping it would open the door for them to offer health coverage to a pool of unrelated employers (or independent contractors).  However, it appears the regulations came up short of accomplishing this goal.

History of Association Health Plans

An integral feature of a sustainable health plan is a large risk pool, which increases the likelihood the plan will contain a balance of healthy people paying premiums to offset sick people incurring claims.  Large employers have a natural advantage in that they need to look no further than their employee (and dependent) population.  Smaller employers (and independent contractors/freelance employees) have historically had a more difficult time finding affordable health insurance coverage. 

Several decades ago, small employers or independent contractors were increasingly seeking to expand their risk pool by banding together with other small employers, typically unrelated but often in similar industries.  Unfortunately, these types of plans far too often became insolvent due to adverse claims experience, financial mismanagement, or in some cases, fraud or embezzlement by the plan administrator. 

To counter this result, the U.S. Department of Labor issued stringent guidelines regulating these so-called "multiple employer welfare arrangements," or "MEWAs."  Most notably, these Department of Labor guidelines permitted states to regulate MEWAs (where self-funded health plans are typically exempt from state regulations).  Many states moved quickly to either regulate MEWAs as insurance carriers or, in many instances, to ban them entirely.  Because each state has the independent authority to regulate MEWA to the extent they deem appropriate, many characterize these MEWA rules as 'prohibiting the sale of insurance across state lines', when in reality it really just made it practically challenging to comply with the myriad state regulations. 

In the wake of Congress's final, unsuccessful attempt to repeal the Affordable Care Act in late 2017, the Trump administration began exploring ways to mitigate the rising cost of health insurance in the individual and small group insurance market, much of which was viewed as being driven by new insurance mandates under the ACA (even though those rules were designed to stabilize those historically shaky markets).  In an October 2017 memorandum, the Trump administration directed the Department of Labor to revisit MEWA guidelines with the intent of permitting formation of association health plans, with the hope of offering small employers the opportunity to avoid the regulatory restrictions that do not exist in the large group market. 

Obstacles Remain

As noted in our Client Alert from January of this year, the proposed regulations (and ultimately the final regulations) did extend some relief to small employers.  Specifically, the regulations would permit certain qualifying unrelated employers with a commonality of interest to form a single health plan.  Under those rules, small employers could potentially avoid the small group market reforms (notably, (1) the community ratings requirement that can serve to increase the cost of coverage for otherwise healthy groups, and (2) the essential health benefits mandate, which prohibits insurers from offering skimpy health coverage).

Even so, and despite many comments urging the Department of Labor to take further actions, the final regulations contain two provisions with the potential to significantly limit the usefulness of association health plans: 

  1. Nondiscrimination Standards.  The final regulations would generally prohibit an association health plan from charging higher rates to certain groups based on their risk profile.  Even though an association health plan may be able to control costs by avoiding some state insurance mandates, if they cannot assess premiums based on groups' risk experience, these plans could face solvency issues similar to those experienced by MEWAs of the past. 
  2. No MEWA Exemption.  The DOL considered, but decided against exempting association health plans from state insurance regulations.  In fact, the DOL expressly notes that they expect that most association health plans will be MEWAs, and as a result, will be subject to state regulations.  This means, among other things:

a) States could prohibit association health plans entirely (or prohibit them from forming on a self-insured basis);

b) States could impose complicated regulatory requirements on association health plans, making it difficult to maintain such a plan across multiple different states; or

c) States could re-impose essential health benefit mandates and community ratings requirements on association health plans (thereby taking away the primary benefit of the new rules). 

The Department of Labor did acknowledge the request for an exemption from MEWA regulations, opening the door to potential future action.  But for the time being, it appears that association health plans may be more geographically limited, gravitating toward states offering a more friendly regulatory environment to these types of plans. 

Future Action Possible?

Given the proximity to midterm elections, it appears unlikely that either the administration or Congress will take further action to address the limitations of the final regulations at this point.  Even so, many insurance experts are predicting that premiums will spike in the upcoming Marketplace enrollment cycle, which could lead to more calls for a political fix.  We expect that in the interim, there will be a divergence at the state level between states that openly accept association health plans and those that attempt to push more small businesses and individuals into the already-existing state Marketplace. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Fisher Phillips LLP
Fisher Phillips LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Fisher Phillips LLP
Fisher Phillips LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions