Rules for Self-Funded MEWAs and AHPs

On Dec. 28, 2018, Vermont’s Dept. of Financial Regulation issued Rule I-2018-02-E to set forth rules, forms and procedures regarding self-funded multiple employer welfare arrangements (MEWAs) and association health plans (AHPs). This rule is intended to protect VT consumers and promote the stability of VT’s health insurance markets through implementing licensure, solvency, reserve and rating requirements. It is important to note that the rule does not apply to fully funded AHPs (including self-funded associations and MEWAs insured via a captive insurance company).

As background, this rule is in response to the DOL’s amendment on June 21, 2018, to ERISA that expanded the definition of “employer” as related to AHPs. VT clarifies that it retains the authority over domestic and foreign self-funded association health benefit plans offering plans to its residents and has authority to regulate any association or MEWA offering a self-funded health benefit plan, to the extent permitted by federal law. This new rule details the new requirements for a self-funded MEWA or AHP and also highlights that self-funded AHPs or MEWAs did not have any authority to operate in the state prior to Jan. 1, 2019.

Among other details provided in the rule, a self-funded health benefit plan offered by an association or MEWA must be licensed and subject to the state’s applicable regulations. The rule details the requirements for licensure, including the requirement to maintain a compliant stop-loss insurance policy or contract, as well as to establish and maintain appropriate reserves for loss and loss adjustment as determined by sound actuarial principles.

In addition to the above, the AHP or MEWA must obtain rate approval from the Green Mountain Care Board on an annual basis. A community rating methodology is required, but permits the AHP or MEWA to be rated based on the collective group experience of its members (rather than at the employer level) provided that each certificate holder and dependent is charged the same community rate and that all members (and their dependents) are guaranteed to be accepted into the plan. Regarding rates — there are several prohibited risk classification factors (for both the employee members and dependents), as well as medical loss ratio requirements.

Each health benefit plan offered must also comply with the state’s essential health benefits, cost sharing requirements, lifetime and annual limits, and all other insurance and benefit mandates. In addition, the plans must follow the requirements for membership, benefits, enrollment periods, financial auditing, advertising/marketing, record retention, advertising/marketing and enforcement authority.

Employers in VT that are considering an AHP or MEWA should familiarize themselves with these rules and also ensure that any agent or broker is aware of them before engaging in such a plan structure.

Rule I-2018-02-E »