Saturday, March 03, 2018

New Jersey bill aims to block Trump admin's proposed rule for Association Health Plans

New Jersey is relatively well defended against the Trump administration efforts to fragment the individual and small group health insurance markets by allowing short-term plans to be sold for year-long terms and easing the path for association health plans (AHPs) to be deemed employers in their own right and so gain large group status.

New Jersey bans short-term plans outright, and tightly regulates association plans (the main species of  multiple employer welfare arrangements, or MEWAs, that is, plans that cover the employees of two or more unrelated employers). In Jersey, MEWAs are regulated as small group plans,even if they're self-funded. (While self-funded plans generally are subject to federal oversight under ERISA, which preempts state law, there has long been an exception enabling states to exert all but full  regulatory control over MEWAs.)

As small group plans, MEWAs in New Jersey are subject to the full suite of ACA coverage rules, including Essential Health Benefits. Small group plans are not available to self-employed individuals, or to small businesses that have no employees other than owner and spouse.. Under the Department of Labor's proposed rule for AHPs, these self-employed individuals and small business owners would be eligible to enroll in AHPs that gain large group status.

Does the proposed rule threaten New Jersey's current regulation of AHPs? That's not clear. On the one hand, "The proposed rules also would not modify the States’ authority to regulate health insurance issuers or the insurance policies they sell to AHPs" (p. 42). At the same time, Kevin Lucia, a professor in Georgetown University's Health Policy Institute, cites concern among experts "that this is potentially going to have to be litigated. If you're an association and you set up in Oklahoma, if you read these regulations, you think, well I can sell everywhere -- and yet, California tells me I can't come in?"

Bottom line for Lucia: "It's a big question whether states will be able to maintain their authority to regulate MEWAs."

That uncertainty likely drives a provision addressing MEWAs in a bill introduced in the New Jersey legislature, S-1877, that would establish a state individual mandate to replace the federal mandate effectively repealed by the Republican Congress.

The bill attempts a triple play to protect and improve the state's individual and small group markets. It would replace the federal individual mandate with a similar state penalty. It would earmark the revenue gained through the tax penalty to help fund a reinsurance program -- for which a companion bill (S-1878) seeks federal funding by authorizing pursuit of an ACA innovation waiver. And finally, it would require individuals who work for small businesses to obtain coverage conforming to small-group rules or otherwise be subject to the mandate penalty.

The provision pertaining to association plans is in Section 4 of S-1877 (my emphasis):

  j.    Health coverage provided under a plan obtained through an association, trust, or multiple employer arrangement, including an out-of-state trust or association, shall not qualify as minimum essential coverage unless the plan complies with the requirements of one or more of the following New Jersey statutes, as applicable to a carrier and health benefits plans offered in the relevant individual, small employer, or large employer markets:

      (1)  P.L.1938, c.366 (C.17:48-1 et seq.);
      (2)  P.L.1940, c.74 (C.17:48A-1 et seq.);
      (3)  P.L.1985, c.236 (C.17:48E-1 et seq.);
      (4)  N.J.S.17B:26-1 et seq.;
      (5)  N.J.S.17B:27-26 et seq.; (refers to 17B:27-27)
      (6)  P.L.1973, c.337 (C.26:2J-1 et seq.);
      (7)  P.L.1992, c.161 (C.17B:27A-2 et seq.);
      (8)  P.L.2001, c.352 (17B:27C-1 et seq.);
      (9)  P.L.1997, c.1972 (C.26:2S-1 et seq.); or
      (10) P.L.1992, c.162 (C.17B:27A-17 et seq.). 

NJ 7B:27C-8, which would be included in #8 above, stipulates:
d.If the member is a small employer, the health benefits to be provided by the self-funded multiple employer welfare arrangement shall at all times be equal to or greater than benefits required to be provided in the lowest benefit level standard plan promulgated by the New Jersey Small Employer Health Benefits Program pursuant to P.L.1992, c.162 (C.17B:27A-17 et seq.).   
If I understand right, if the federal government and courts ultimately assert unequivocally that a large-group MEWA can sell to employees of small business in any state, this provision would effectively tell those individuals in New Jersey: "True enough -- but you can't buy what they're offering unless you want to pay a penalty."

Another statute in the list above appears to declare that coverage obtained from an association formed purely for the purpose of offering insurance would not qualify as minimum essential coverage.

Section 17B:27-26 states, "No group health insurance policy may be delivered or issued for delivery in this State unless it conforms to one of the descriptions set forth in sections 17B:27-27 to 17B:27-29, inclusive."  17B:27-27 authorizes only an association "formed for purposes other than obtaining such insurance":
17B:27-27. Employer, trustee, labor union, association groupsA policy issued to an employer or to the trustees of a fund established by one or more employers, or issued to a labor union, or issued to an association formed for purposes other than obtaining such insurance, or issued to the trustees of a fund established by one or more labor unions or by one or more employers and one or more labor unions, insuring employees and members of associations or labor unions.
The current ERISA requirement (as currently understood) that an association have a purpose other than offering insurance is one of those that the DOL's proposed rule proposes to waive (Sect. 4a: Employers Could Band Together for the Single Purpose of Obtaining Health Coverage).

If both the DOL's proposed rule for association plans and the New Jersey individual mandate bill are finalized more or less as is, would ERISA (as reinterpreted by the rule) preempt New Jersey's attempt to subject certain buyers of association plans to the state's mandate penalty -- and to prevent associations formed solely to offer insurance from operating in the state?

Healthcare legal eagles, weigh in!

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