Biden Admin formally kills "Ass" part of #ShortAssPlans expansion

Regular readers may have noticed that while I've written plenty about non-ACA compliant Short-Term, Limited Duration (STLD) healthcare policies (the "Short" part of my #ShortAssPlans hashtag), I've written far less about the "Ass" part...namely, Association Health Plans (AHPs)

The main reason for this is that I simply don't understand AHPs as well and don't want to misinform people about them. The other reason is that they sort of have one foot each in the worlds of the Individual and Small Group markets, and I write mostly about the Individual market.

Here's a taste of why AHPs are bad news, from New York Times reporter Robert Pear several years back:

But these health plans, created for small businesses, have a darker side: They have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills.

The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials who regulate the type of plans Mr. Trump is encouraging, known as association health plans.

In many cases, the Labor Department said, it has targeted “unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.” In several cases, it has found that people managing these health plans diverted premiums to their personal use.

The department filed suit this year against an association health plan for 300 small employers in Washington State, asserting that its officers had mismanaged the plan’s assets and charged employers more than $3 million in excessive “administrative fees.” Operators of the health plan violated their fiduciary duty by using its assets “in their own interest,” rather than for the benefit of workers, the government said.

Marc I. Machiz, who investigated insurance fraud as a Labor Department lawyer for more than 20 years, said the executive order was “summoning back demons from the deep.”

...But Mila Kofman, a former insurance superintendent in Maine who has done extensive research on association health plans, said they also often falsely claimed to be exempt from state insurance laws, as a way to explain how they could offer premiums lower than those charged by licensed insurance companies.

...But history shows the risks of an expansion of association health plans. If a plan becomes insolvent, the impact on consumers can be devastating.

...when they went to the doctor, they found out all of a sudden that their insurance company, their perceived insurance company, was in receivership and that they had no coverage.”

...The defendants concealed the plan’s financial problems from plan participants and left more than $3.6 million in unpaid claims, the department said in court papers.

In another case, a federal appeals court found that a health plan for small businesses in New Jersey was “aggressively marketed but inadequately funded.” The plan collapsed with more than $7 million in unpaid claims.


Fraud? Abuse? Unscrupulous promoters? Default on obligations? Diverting funds for personal use?

Needless to say, Donald Trump thought all of that sounded great, so he changed regulations to promote more of these types of "association plans."

Thankfully, the rule change was never actually implemented thanks to a lawsuit filed by Democratic state attorneys general, but it was still sort of lingering in limbo for years.

Last week, the Biden Administration officially put the kibosh on the rule (not sure why it took over 3 years but these things can get pretty wonky & messy):

Democratic lawmakers and other stakeholders are applauding the Biden administration for fully rescinding a Trump-era rule that allowed more employers to band to together to create association health plans (AHPs) in a rule finalized Monday (April 29) -- presumably in time to avert a potential effort to negate the move via the Congressional Review Act by Republican lawmakers who say rescinding the Trump rule takes away choices for employers who are desperate for affordable options. Meanwhile, a coalition of AHPs is pushing legislation introduced in the Senate, and recently backed by state regulators, that would still promote more fully insured or self-funded large group AHPS by allowing non-related industries to create them and sole proprietors to join.

Under long-standing Department of Labor guidance, small employers that meet certain criteria can join to form association health plans, which fall under the same regulatory structure as large employers, meaning they do not have to adhere to Affordable Care Act requirements -- including coverage of the 10 essential health benefits.

To qualify as a bona fide AHPs, employers had to have a purpose other than providing insurance, be in related industries, and have control over the benefit program. In 2018, however, the Trump administration expanded the criteria to pull in far more companies, including those in non-related industries, and employers that have no workers to participate in fully insured or self-funded large group plans.

A group of Democratic attorneys general sued the Trump administration arguing that its rule undermined the ACA, and in 2019, Judge John Bates of the DC District Court agreed with plaintiffs. Although the rule was vacated and never implemented, stakeholders who opposed it still wanted the Biden administration to clear if from the books and they celebrated the final rule out Monday.