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Making Sense of AHPs for 2019

Insight & Impact - Labor & Employment Newsletter John L. Barlament


Employers are constantly worrying about how to control health plan costs. One idea which has been around for decades is the idea of smaller employers joining together to obtain health plan coverage. The idea is that larger employers can more effectively negotiate rates or even avoid some legal requirements that smaller employers face.

Traditionally, though, there have been legal obstacles to employers joining together in this manner. Congress has adopted a law subjecting “multiple employer welfare arrangements” (“MEWAs”) to more-stringent regulations. The U.S. Department of Labor (“DOL”) and states subject MEWAs to stricter scrutiny – or even prohibit some MEWAs from operating in a particular state.

Read more Insight & Impact from December 2018:


Trump Administration Makes Its Move. In October 2017 President Trump issued an executive order requesting that the DOL consider ways to make it easier for employers to band together and provide health plan coverage. The DOL followed suit in 2018, releasing final regulations on “association health plans” (“AHPs”). The new regulations allow AHPs to some extent. This may allow unrelated employers to band together and obtain health plan coverage (either on a self-funded or fully-insured basis).

Administrative Requirements. The new DOL AHP rules generally allow for AHPs to be created and used in 2019. But setting up an AHP requires some work. AHPs must, among other things,:

(1) have a formal structure / by-laws;

(2) be controlled directly or indirectly by employers;

(3) ensure that members have a “commonality of interest”, such as similar industry or geography; and

(4) meet certain nondiscrimination requirements.

In addition, prior, “old” rules on association health plans also remain valid. But those are generally more stringent and less flexible than the new rules.

MEWA Hurdle. Probably the largest legal hurdle for AHPs remains the same legal hurdle which has always existed – they are still considered MEWAs. As MEWAs, states can still impose restrictions on them. Some states even prohibit certain MEWAs. Other states have yet to clarify how AHPs will be treated. Given that, AHPs present both an opportunity but also a risk. Employers wishing to consider an AHP must carefully consider all the factors related to them.

For more information on MEWAs and AHPs, contact your local Quarles & Brady attorney or