Small Businesses and Freelancers Could Team Up for Health Insurance Under Proposed Association Health Plans Act

This bill, the Association Health Plans Act, aims to make it easier for groups of employers, including self-employed individuals, to band together and offer group health insurance. It works by changing the definition of 'employer' under the Employee Retirement Income Security Act of 1974 (ERISA), allowing qualifying associations to act as a single entity for providing health coverage.

How Associations Could Offer Coverage

Under this proposal, a group or association of employers could offer a health plan if it meets specific criteria laid out in Section 2. These include requirements like providing coverage to at least 51 employees total across the group, being active for at least two years (not just formed to sell insurance), having a governing board primarily controlled by employer members, and not being a health insurance company itself. Critically, membership can't be based on health status, and coverage must be offered to all employees of member employers regardless of health.

For the growing number of self-employed folks – think freelancers, gig workers, independent contractors – Section 2 offers a potential path to group coverage. If you have a 'bona fide ownership right' in your business, earn income from it, and work at least 10 hours a week or 40 hours a month, you could potentially be treated as both an 'employer' and an 'employee' to join or form one of these associations.

Setting the Price: How Premiums Might Work

Section 3 outlines how these Association Health Plans (AHPs) could set their prices. Generally, they can establish base premium rates using an 'actuarially sound, modified community rating methodology' that considers the pooled claims of all participants in the plan. However, the bill also allows the AHP to adjust the contribution rates for each specific employer member based on that employer's unique 'risk profile'. This means while the base rate looks at the whole group, a small business with generally older or less healthy employees could potentially face higher contribution requirements than a business with younger, healthier workers within the same association.

There's a specific rule for associations made up only of self-employed individuals (minimum 20 members): they must pool all participant claims and charge every self-employed participant the same premium rate.

Built-in Rules and Protections

The Act includes important non-discrimination protections (Section 3). AHPs cannot deny enrollment or charge individuals higher premiums based on health factors like medical conditions, claims history, or genetic information. Pre-existing conditions cannot be grounds for denying coverage.

Furthermore, Section 4 clarifies that these AHPs aren't exempt from existing federal rules governing group health plans under ERISA Part 7 and the Public Health Service Act Title XXVII. These underlying rules include mandates related to things like covering pre-existing conditions and preventative services, although the exact application can depend on the plan type. Finally, Section 2 specifies that merely participating in an AHP doesn't automatically make member employers 'joint employers' under other federal or state laws.