The US Department of Labor’s (DOL) proposed rules on association health plans (AHPs) could have a future impact on the medical stop-loss captive insurance market, according to Phillip Giles, vice president of sales and marketing at QBE North America.
The rule, which is still in the proposal stage, would make it easier for groups or associations of employers to band together to form an AHP.
These AHPs would be treated as a large group health plan for the purposes of the Affordable Care Act, which it is hoped would allow them to obtain health coverage at a lower cost.
Giles also suggested the rules will also “effectively amend regulations within the Employee Retirement Income Security Act (ERISA) to make it easier for individual employers to band together and be treated (regulated) as if they were one single large employer rather than numerous separate entities”.
Should the ruling be adopted, it would not impede a state’s ability to regulate Multiple Employer Welfare Arrangements (MEWAs) but, it would allow for broader expansion of of MEWAs. I would hope that the finalised rules would create more uniform regulation across all states.
Giles predicted the AHP rules will have an impact on the captive insurance market, however, he said that the impact will be three to five years after the regulations are passed.
AHPs are primarily targeted at small employers, allowing them to be collectively treated as one entity for the purposes of regulation and underwriting.
Due to this, Giles suggested that most AHPs will establish as and remain in a fully-insured structure until sufficient mass (over 1,000 lives) and credible track record (five years) can be attained.
After which point, he expects a large number of AHPs to convert to a self-insured structure as this will allow them to capitalise on a self-insured plans ability to preempt state insurance regulation and benefit mandates.
Giles explained: “I would expect that a significant number of the self-insured AHPs would then explore the assumption of stop-loss risk in a captive as a way to maximise the effectiveness and efficiency of the overall programme.”
He added: “I expect that AHP legislation will pass in some form; this will enable broader formation of MEWAs. Once the self-insured AHPs first establish appropriate solvency and credibility, the market should see a fairly significant number placing medical stop-loss into a captive.”
