SB1085 - 541R - Senate Fact Sheet

Purpose

Modifies and establishes requirements for association health plans (AHPs).

Background

An AHP is a health plan that is sponsored by a group or association of employers in order to provide health care coverage for their employees. AHPs are regulated by state and federal law and allow qualified small employers to join together to buy coverage similar to large employers. The U.S. Department of Labor (U.S. DOL) issued a final rule, effective August 20, 2018, that establishes criteria under the federal Employee Retirement Income Security Act (ERISA) for determining when employers may join together in a group or association of employers that is treated as the employer sponsor of a single multiple-employer employer welfare benefit plan and group health plan.

ERISA requirements for associations and groups include: 1) the primary purpose of the group or association can 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 bylaws or other similar indications of formality; 4) the employer members have a commonality of interest; and 5) the group or association only makes health coverage through the group's or association's group health plan available to employees of a current employer member of the group or association and certain former employees (29 C.F.R. § 2510.3-5).

Current statute 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: 1) has been in active existence for at least five years; 2) 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; 3) has a constitution and bylaws; 4) 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; 5) 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 6) 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 small employer is an employer who employs at least 2 but no more than 50 eligible employees on a typical business day during any one calendar year (A.R.S. §§ 20-2301 and
20-2324).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

Provisions

1. Establishes that a Path 1 bona fide association:

a) has been formed and maintained in good faith for purposes other than obtaining insurance and does not condition association membership on the purchase of association-sponsored insurance;

b) has a constitution and bylaws;

c) insures at least 25 association members, employees or employees of members for the benefit of individuals other than the association or association officers or trustees;

d) does not condition membership on any health status-related factor and clearly states such in all membership and application materials;

e) makes health benefits plans offered through the association available to all members regardless of health status-related factors and clearly states such in all membership and application materials; and

f) does not make health benefits plans offered through the association available other than in connection with a member of the association and clearly states such in all membership and application materials.

2. Establishes that a Path 2 bona fide association meets prescribed federal requirements that a bona fide group or association of employers must meet to establish a group health plan that is an employee welfare benefit plan.

3. Specifies that an insurer who elects to offer health benefits plans through a bona fide association to small employer groups of one, including sole proprietors or working owners, is not required to meet certain criteria prescribed for accountable health plans offered to small employers, if the small employer group of one is not seeking a health benefits plan through a bona fide association.

4. Permits the DOI to survey insurers issuing health benefits plans to determine the number of health benefits plans issued to bona fide associations in Arizona each year.

5. Specifies that the issuance of self-funded health benefits plans in Arizona through a bona fide association is not limited or prohibited if the association is established and operating in compliance with applicable ERISA requirements.

6. States that the DOI maintains the authority to investigate whether an association is unlawfully transacting insurance.

7. Requires the DOI to post information on their website that summarizes applicable state law and other pertinent information related to AHPs.

8. Defines employees, bona fide association, small employer, sole proprietor and working owner.

9. Makes technical and conforming changes.

10. Becomes effective on the general effective date.

Amendments Adopted by Committee

· Adopted the strike-everything amendment relating to AHPs.

Senate Action

HHS 2/20/19 DPA/SE 7-0-1