14 HEALTHCARE www.captiveinternational.com
Proposed association health plan
regulations by the US Department of
Labor could open up opportunities
for captives, as Phillip Giles of QBE
North America explains.
arlier this year, the US
Department of Labor (DOL)
issued a proposed rule
that provides direction
to businesses seeking to create
association health plans (AHPs). An
AHP is a grouping of small employers
that have banded together to replicate
the profile of a much larger single entity.
The rule, still in proposal stage, would
effectively broaden the definition of
an “employer” under the Employee
Retirement Income Security Act of 1974
(ERISA) to include AHPs which provide
properly qualified health benefits to
participants. The AHP rule would allow
the grouping of smaller employers to
be viewed as if it were a larger single
employer for underwriting, rating and
Key points and considerations
In the world of employee benefits,
groups of employers banding together
to form a communal health plan are
typically known as multiple employer
welfare arrangements (MEWAs) and are
structurally analogous to most medical
plans provided by Taft-Hartley qualified
labour unions and professional
employer organisations (PEOs).
In a typical MEWA, premium
contributions from several employers
are commingled into a single trust
or custodial account or fund and
used either to purchase insurance
or to pay claims directly to providers
or employees. All MEWA funds are
controlled and managed by a centralised
administrator, with little or no direct
control by participating employers.
The DOL, via ERISA, empowers
individual states with regulatory authority
for MEWAs, which in turn tend to be tightly
regulated to ensure their fiscal solvency.
MEWAs are currently prohibited in a
significant number of states.
The ruling, if adopted, would not
impede a state’s ability to regulate
MEWAs but would allow for their broader
application and increased expansion.
The rule, as proposed, would allow
for two types of qualified structures
relative to membership composition:
• Heterogeneous industry composition,
which will be limited to one state; and
• Homogeneous industry composition,
which can have members in more than
one (any) state.
The proposed rule will also allow
AHPs to be formed specifically for the
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