NY Regulation of Association Health Plans

On July 27, 2018, the Dept. of Financial Services issued Insurance Circular Letter No. 10 to remind insurers authorized to write accident and health insurance in the state that NY strictly limits the associations or groups of employers that may sponsor a health insurance plan.

As background, on June 19, 2018, the EBSA issued a final rule related to the creation and maintenance of association health plans (AHPs) under ERISA. The rule modified an AHP requirement that the group or association must have a “commonality of interest” and further prevented associations to exist solely for the purpose of purchasing or providing health benefits to its members. Under the new AHP rule, the group or association must have at least one substantial business purpose unrelated to the provision of benefits, although the principal purpose may be the provision of benefits. That being said, the rule clarifies that it doesn't, in whole or in part, preempt state regulation of MEWAs.

Regardless of this new EBSA rule, the group or association of employers of a fully insured MEWA in NY must meet specific requirements to be recognized under the insurance law (i.e., be in active existence for at least two years). Associations that are primarily formed for the purpose of obtaining health insurance coverage aren't a recognized group and may not deliver or issue for delivery health insurance policies or contracts in NY.

A self-funded MEWA in this state is also required to be licensed to do insurance business, regardless of where the association is located. In addition, New York also retains jurisdiction for out-of-state associations, so that health insurance coverage issued to its residents or insurance policies delivered or issued for delivery in the state are regulated by New York insurance law.

The main purpose of this letter is to remind insurers that the state retains the right to regulate MEWAs regardless of changes to federal law. Employers should be aware that their participation in such a plan will likely fall under NY's jurisdiction.

Insurance Circular Letter No. 10 »