ARIZONA HOUSE OF REPRESENTATIVES

SB 1085: association health plans; definitions; requirements

PRIME SPONSOR: Senator Brophy McGee, LD 28

BILL STATUS: House Engrossed

Overview

Revises and establishes requirements for association health plans (AHP).

History

An AHP is a health plan that is sponsored by a group or association of employers in order to provide healthcare coverage for their employees. The United States Department of Labor issued a final rule effective August 20, 2018 that establishes criteria under the Employee Retirement Income Security Act (ERISA) for determining when employers may join together in a group or association of employers that will be treated as the employer sponsor of a single multiple-employer "employer welfare benefit plan" and "group health plan".

29 Code of Federal Regulations § 2510.3-5  provides that requirements for associations and groups include: 1) the primary purpose may be to offer and provide health coverage to its employer members and their employees; however, the group or association also must have at least one substantial business purpose unrelated to offering and providing health coverage or other employee benefits to its employer members and their employees; 2) each employer member of the group or association participating in the group health plan is a person acting directly as an employer of at least one employee who is a participant covered under the plan; 3) the group or association has a formal organizational structure with a governing body and has by-laws or other similar indications of formality; 4) the functions and activities of the group or association are controlled by its employer members, and the group's or association's employer members that participate in the group health plan control the plan; and 5) the employer members have a commonality of interest.

A.R.S. § 20-2324 requires every association that qualifies as a bona fide association to file a statement with the Director of the Department of Insurance (DOI) that certifies that the association: has been in active existence for at least five years; has been formed and maintained in good faith for purposes other than obtaining insurance and does not condition membership in the association on the purchase of insurance that is sponsored by the association; has a constitution and bylaws; insures at least 25 members, employees or employees of members of the association for the benefit of persons other than the association or its officers or trustees; does not condition membership in the association on any health status-related factor relating to an individual, including an employee of an employer or a dependent of an employee, and clearly states this in all membership and application materials; and does not make health benefits plans offered through the association available other than in connection with a member of the association and clearly states this in all membership and application materials.

A.R.S. § 20-2301 defines a small employer as an employer who employs at least two but not more than fifty eligible employees on a typical business day during any one calendar year.

Provisions

1. Delineates Path 1 and Path 2 bona fide associations. (Sec. 1)

2. Removes the requirement for a Path 1 bona fide association to have been in existence for at least five years. (Sec. 1)

3. Specifies that an association qualifies as a Path 2 bona fide association if the association meets the requirements of 29 CFR § 2510.3-5. (Sec. 1)

4. States that an insurer electing to offer health benefits plans through a bona fide association to small employer groups of one, which may include sole proprietors or working owners, is not required to make health benefits plans available to small employer groups of one if the small employer is not seeking health benefits plan through a bona fide association. (Sec. 1)

5. The requirements for a Path 1 bona fide association do not apply to health benefits plans offered by an accountable health plan if the accountable health plan makes this coverage available in the small group market only through one or more Path 1 bona fide associations. (Sec. 1)

6. Allows DOI to survey insurers issuing health benefits plans to determine the number of health benefits plans issued to bona fide associations in this state each year. (Sec. 1)

7. States this does not limit or prohibit the issuance of self-funded health benefits plans in this state through a bona fide association if the association is established and operating in compliance with applicable provisions of ERISA. (Sec. 1)

8. Provides that DOI retains authority to investigate whether an association is unlawfully transacting insurance in violation of Title 20. (Sec. 1)

9. Modifies the definition of employee and defines bona fide association, small employer, sole proprietor and working owner. (Sec. 1)

10. Requires DOI to post information on their website that summarizes applicable state law and other pertinent information related to association health plans by January 1, 2020.  (Sec. 1)

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14. Fifty-fourth Legislature                       SB 1085

15. First Regular Session                            Version 3: House Engrossed

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