Association Health Plan Guidance

On June 12, 2019, the Department of Financial Regulation (DFR) published Insurance Bulletin No. 205. The bulletin addresses DFR’s position with regard to association health plans (AHPs) in conjunction with a district court ruling invalidating a portion of the DOL’s AHP final regulations. As background, the U.S. District Court for the District of Columbia invalidated the DOL’s 2018 AHP rules which provided additional avenues for AHP formation (referred to by DFR as “Pathway 2 AHPs”), concluding that the DOL exceeded its rulemaking authority under ERISA by modifying the definition of “employer” to expand the availability of AHPs. The court’s ruling vacated the AHP rule and remanded it to the DOL for reconsideration, and is in effect nationwide, including Vermont. The DOL has appealed that decision, but in the meantime did not request a stay — that means the AHP rule will remain vacated unless the court’s decision is overturned on appeal.

According to the bulletin, DFR – following a DOL FAQ – states that existing Pathway 2 AHPs may continue to operate through Plan Year 2019, but may not enroll new employer groups (or individuals who do not qualify for special enrollment within existing employer groups). Further, VT insurers must honor existing AHP policies and pay valid claims through the end of 2019 or at the expiration of the policy (whichever is later).

DFR also states that it cannot approve Pathway 2 AHPs to operate beyond plan year 2019 because the court’s decision vacated the Pathway 2 AHP rules, there was no stay on that decision, and the decision has nationwide effect. As a result, Pathway 2 AHPs may not advertise for plan years 2019 or 2020. DFR goes even further to state that Pathway 2 AHPs operating in Vermont must post a public-facing notice prominently on their website stating that new groups cannot be accepted and that current plan members will have to seek alternative coverage during open enrollment for plan year 2020. Pathway 1 MEWAs and AHPs (those formed prior to the DOL’s Pathway 2 AHP rules) will be allowed to operate in VT consistent with the above-mentioned rules in plan year 2019 and beyond.

AHPs that are operating in VT should work with carriers to ensure coverage continues for AHP participants for the remainder of the plan year 2019. Pathway 2 AHPs will have to comply with DFR’s rules pursuant to the bulletin, though.

Insurance Bulletin No. 205 »