[House Report 118-112]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 118-112
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ASSOCIATION HEALTH PLANS ACT
_______
June 14, 2023.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Foxx, from the Committee on Education and the Workforce, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 2868]
[Including cost estimate of the Congressional Budget Office]
The Committee on Education and the Workforce, to whom was
referred the bill (H.R. 2868) to amend the Employee Retirement
Income Security Act of 1974 to clarify the treatment of certain
association health plans as employers, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Association Health Plans Act''.
SEC. 2. TREATMENT OF GROUP OR ASSOCIATION OF EMPLOYERS.
(a) In General.--Section 3(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(5)) is amended--
(1) by striking ``The term'' and inserting ``(A) The term'';
and
(2) by adding at the end the following:
``(B) For purposes of subparagraph (A), a group or association of
employers shall be treated as an `employer', regardless of whether the
employers composing such group or association are in the same industry,
trade, or profession, if such group or association--
``(i)(I) has established and maintains an employee welfare
benefit plan that is a group health plan (as defined in section
733(a)(1));
``(II) provides coverage under such plan to at least 51
employees after all of the employees employed by all of the
employer members of such group or association have been
aggregated and counted together as described in subparagraph
(D);
``(III) has been actively in existence for at least 2 years
prior to establishing and maintaining an employer welfare
benefit plan that is a group health plan (as defined in section
733(a)(1));
``(IV) has been formed and maintained in good faith for
purposes other than providing medical care (as defined in
section 733(a)(2)) through the purchase of insurance or
otherwise;
``(V) does not condition membership in the group or
association on any health status-related factor (as described
in section 702(a)(1)) relating to any individual;
``(VI) makes coverage under such plan available to all
employer members of such group or association regardless of any
health status-related factor (as described in section
702(a)(1)) relating to such employer members;
``(VII) does not provide coverage under such plan to any
individual other than an employee of an employer member of such
group or association;
``(VIII) has established a governing board with by-laws or
other similar indications of formality to manage and operate
such plan in both form and substance, of which at least 75
percent of the board members shall be made up of employer
members of such group or association participating in the plan
that are duly elected by each participating employer member
casting 1 vote during a scheduled election;
``(IX) is not a health insurance issuer (as defined in
section 733(b)(2)), and is not owned or controlled by such a
health insurance issuer or by a subsidiary or affiliate of such
a health insurance issuer, other than to the extent such a
health insurance issuer--
``(aa) may participate in the group or association as
a member; and
``(bb) may provide services such as assistance with
plan development, marketing, and administrative
services to such group or association;
``(ii) meets any set of criteria to qualify for such
treatment in an advisory opinion issued by the Secretary prior
to the date of enactment of the Association Health Plans Act;
or
``(iii) meets any other set of criteria to qualify for such
treatment that the Secretary by regulation may provide.
``(C)(i) For purposes of subparagraph (B), a self-employed individual
shall be treated as--
``(I) an employer who may become a member of a group or
association of employers;
``(II) an employee who may participate in an employee welfare
benefit plan established and maintained by such group or
association; and
``(III) a participant of such plan subject to the eligibility
determination and monitoring requirements set forth in clause
(iii).
``(ii) For purposes of this subparagraph, the term `self-employed
individual' means an individual who--
``(I) does not have any common law employees;
``(II) has an ownership right in a trade or business,
regardless of whether such trade or business is incorporated or
unincorporated;
``(III) earns wages (as defined in section 3121(a) of the
Internal Revenue Code of 1986) or self-employment income (as
defined in section 1402(b) of such Code) from such trade or
business; and
``(IV) works at least 10 hours per week or 40 hours per month
providing personal services to such trade or business.
``(iii) The board of a group or association of employers shall--
``(I) initially determine whether an individual meets the
requirements under clause (ii) to be considered a self-employed
individual for the purposes of being treated as an--
``(aa) employer member of such group or association
(in accordance with clause (i)(I)); and
``(bb) employee who may participate in the employee
welfare benefit plan established and maintained by such
group or association (in accordance with clause
(i)(II));
``(II) through reasonable monitoring procedures, periodically
determine whether the individual continues to meet such
requirements; and
``(III) if the board determines that an individual no longer
meets such requirements, not make such plan coverage available
to such individual (or dependents thereof) for any plan year
following the plan year during which the board makes such
determination. If, subsequent to a determination that an
individual no longer meets such requirements, such individual
furnishes evidence of satisfying such requirements, such
individual (and dependents thereof) shall be eligible to
receive plan coverage.
``(D) For purposes of subparagraph (B), all of the employees
(including self-employed individuals) employed by all of the employer
members (including self-employed individuals) of a group or association
of employers shall be--
``(i) treated as employed by a single employer; and
``(ii) aggregated and counted together for purposes of any
regulation of an employee welfare benefit plan established and
maintained by such group or association.''.
(b) Determination of Employer or Joint Employer Status.--The
provision of employee welfare benefit plan coverage by a group or
association of employers shall not be construed as evidence for
establishing an employer or joint employer relationship under any
Federal or State law.
SEC. 3. RULES APPLICABLE TO GROUP HEALTH PLANS ESTABLISHED AND
MAINTAINED BY A GROUP OR ASSOCIATION OF EMPLOYERS.
Part 7 of subtitle B of title I of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1181, et seq.) is amended by adding at
the end the following:
``SEC. 736. RULES APPLICABLE TO GROUP HEALTH PLANS ESTABLISHED AND
MAINTAINED BY A GROUP OR ASSOCIATION OF EMPLOYERS.
``(a) Premium Rates for a Group or Association of Employers.--
``(1)(A) In the case of a group health plan established and
maintained by a group or association of employers described in
section 3(5)(B), such plan may--
``(i) establish base premium rates formed on an
actuarially sound, modified community rating
methodology that considers the pooling of all plan
participant claims; and
``(ii) utilize the specific risk profile of each
employer member of such group or association to
determine contribution rates for each such employer
member's share of a premium by actuarially adjusting
above or below the established base premium rates.
``(B) For purposes of paragraph (1), the term `employer
member' means--
``(i) an employer who is a member of such group or
association of employers and employs at least 1 common
law employee; or
``(ii) a group made up solely of self-employed
individuals, within which all of the self-employed
individual members of such group or association are
aggregated together as a single employer member group,
provided the group includes at least 20 self-employed
individual members.
``(2) In the event a group or association is made up solely
of self-employed individuals (and no employers with at least 1
common law employee are members of such group or association),
the group health plan established by such group or association
shall--
``(A) treat all self-employed individuals who are
members of such group or association as a single risk
pool;
``(B) pool all plan participant claims; and
``(C) charge each plan participant the same premium
rate.
``(b) Discrimination and Pre-existing Condition Protections.--A group
health plan established and maintained by a group or association of
employers described in section 3(5)(B) shall be prohibited from--
``(1) establishing any rule for eligibility (including
continued eligibility) of any individual (including an employee
of an employer member or a self-employed individual, or a
dependent of such employee or self-employed individual) to
enroll for benefits under the terms of the plan that
discriminates based on any health status-related factor that
relates to such individual (consistent with the rules under
section 702(a)(1));
``(2) requiring an individual (including an employee of an
employer member or a self-employed individual, or a dependent
of such employee or self-employed individual), as a condition
of enrollment or continued enrollment under the plan, to pay a
premium or contribution that is greater than the premium or
contribution for a similarly situated individual enrolled in
the plan based on any health status-related factor that relates
to such individual (consistent with the rules under section
702(b)(1)); and
``(3) denying coverage under such plan on the basis of a pre-
existing condition (consistent with the rules under section
2704 of the Public Health Service Act).''.
SEC. 4. RULE OF CONSTRUCTION.
Nothing in this Act shall be construed to exempt a group health plan
which is an employee welfare benefit plan offered through a group or
association of employers from the requirements of part 7 of subtitle B
of title I of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1181 et. seq.), including the provisions of part A of title
XXVII of the Public Health Service Act as incorporated by reference
into this Act through section 715.
Purpose
There is an urgent need to address health care challenges
facing working families and small businesses. Democrat
policies, like Obamacare, have sold Americans a faulty bill of
goods and led to consolidation in the marketplace, skyrocketing
premiums, and a broken individual health market that costs
taxpayers more than a trillion dollars while covering only 9
percent of the population.
H.R. 2868, the Association Health Plans Act, amends the
Employee Retirement Income Security Act of 1974 (ERISA) to
improve access to affordable health coverage options for
workers employed by small businesses. The bill amends ERISA to
authorize the creation of association health plans (AHPs)
sponsored by groups or associations of employers. The
legislation allows small businesses and self-employed
individuals to band together across state lines through
associations, thus increasing their bargaining power with plans
and providers and placing them on a more level playing field
with larger companies and unions. H.R. 2868 frees small
businesses from costly state-mandated benefit packages, spreads
risk for self-employed individuals, and lowers overhead costs,
enabling employers to offer more affordable health care
coverage to their workers and enabling self-employed
individuals to access more affordable health care coverage.
Committee Action
109TH CONGRESS
Legislative Action
On February 2, 2005, Rep. Sam Johnson (R-TX), then-Chairman
of the Employer-Employee Relations Subcommittee of the
Committee on Education and the Workforce (Committee),
introduced the Small Business Health Fairness Act (H.R. 525),
along with 53 bipartisan original cosponsors, including then-
Chairman of the Committee, John Boehner (R-OH), and Reps. Nydia
Velazquez (D-NY) and Albert Wynn (D-MD).
On March 16, 2005, the Committee ordered H.R. 525, without
amendment, favorably reported to the House of Representatives
by a vote of 25 to 22. On April 13, 2005, the Committee filed
its committee report, which detailed the history of the need
for the legislation and prior committee action.\1\ On July 26,
2015, H.R. 525 passed the full House by a vote of 263 to 165.
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\1\H.R. Rep. No. 109-41 (2005).
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111TH CONGRESS
Legislative Action
Between July 15-17, 2009, the Committee met to mark up H.R.
3200, the America's Affordable Health Choices Act of 2009.\2\
During the markup, Rep. Howard P. ``Buck'' McKeon (R-CA)
offered an amendment to create a new title at the end of
Division A of H.R. 3200, titled Title IV--Small Business Health
Fairness. The amendment included rules governing AHPs, the
treatment of single-employer arrangements, enforcement
provisions, and other provisions related to AHPs. The amendment
was defeated by a vote of 21 to 27.
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\2\H.R. 3200 was the House precursor to the law known as the
Affordable Care Act.
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On November 7, 2009, the House passed H.R. 3962, the
Affordable Health Care for America Act. During the debate,
former Speaker John Boehner (R-OH) included the AHP legislative
text in the Republican motion to recommit.\3\
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\3\H. Amend. 510 to H.R. 3962, 111th Cong. (2009).
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On March 21, 2010, the House passed the Patient Protection
and Affordable Care Act by a vote of 219 to 212 to resolve
differences with the Senate. The bill was signed by President
Obama on March 23, 2010.\4\ On March 25, 2010, the House passed
the Health Care and Education Reconciliation Act of 2010 by a
vote of 220 to 207 to resolve differences with the Senate. This
bill was signed into law by President Obama on March 30,
2010.\5\ Collectively, the two bills are known as the
Affordable Care Act (ACA or Obamacare).\6\ The ACA did not
include AHP legislative text.
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\4\Patient Protection and Affordable Care Act, Pub. L. No. 111-148
(2010).
\5\Health and Education Reconciliation Act, Pub. L. No. 111-152
(2010).
\6\Patient Protection and Affordable Care Act, Pub. L. No. 111-148
(2010), and Health and Education Reconciliation Act, Pub. L. No. 111-
152 (2010).
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112TH CONGRESS
First Session--Hearing
On February 9, 2011, the Committee held a hearing entitled
``The Impact of the Health Care Law on the Economy, Employers,
and the Workforce.'' This was the Committee's first hearing to
investigate Obamacare and hear directly from job creators about
how the 2010 law affects their ability to expand their business
and hire new workers. The hearing also examined AHPs. The
witnesses were Dr. Paul Howard, Senior Fellow, Manhattan
Institute, New York, New York; Ms. Gail Johnson, President and
CEO, Rainbow Station, Inc., Glenn Allen, Virginia; Dr. Paul Van
de Water, Senior Fellow, Center on Budget and Policy
Priorities, Washington, D.C.; and Mr. Neil Trautwein, Vice
President and Employee Benefits Policy Counsel, National Retail
Federation, Washington, D.C.
115TH CONGRESS
First Session--Hearings
On February 1, 2017, the Committee held a hearing entitled
``Rescuing Americans from the Failed Health Care Law and
Advancing Patient-Centered Solutions,'' which examined failures
of the ACA and also examined association health plans.
Witnesses were Mr. Scott Bollenbacher, CPA, Managing Partner,
Bollenbacher and Associates, LLC, Portland, Indiana; Mr. Joe
Eddy, President and Chief Executive Officer, Eagle
Manufacturing Company, Wellsburg, West Virginia; Ms. Angela
Schlaack, St. Joseph, Michigan; and Dr. Tevi Troy, Chief
Executive Officer, American Health Policy Institute,
Washington, D.C.
On February 1, 2017, the Committee held a hearing entitled
``Rescuing Americans from the Failed Health Care Law and
Advancing Patient-Centered Solutions,'' which examined failures
of the ACA and also examined association health plans.
Witnesses were Mr. Scott Bollenbacher, CPA, Managing Partner,
Bollenbacher and Associates, LLC, Portland, Indiana; Mr. Joe
Eddy, President and Chief Executive Officer, Eagle
Manufacturing Company, Wellsburg, West Virginia; Ms. Angela
Schlaack, St. Joseph, Michigan; and Dr. Tevi Troy, Chief
Executive Officer, American Health Policy Institute,
Washington, D.C.
On March 1, 2017, the Committee held a hearing entitled
``Legislative Proposals to Improve Health Care Coverage and
Provide Lower Costs for Families,'' which examined the Small
Business Health Fairness Act of 2017 (H.R. 1101), among other
proposals. H.R. 1101 provides a legislative solution for
association health plans. Witnesses were Mr. Jon B. Hurst,
President, Retailers Association of Massachusetts, Boston,
Massachusetts; Ms. Allison R. Klausner, J.D., Principal,
Government Relations Leader, Conduent, Secaucus, New Jersey;
Ms. Lydia Mitts, Associate Director of Affordability
Initiatives, Families USA, Washington, D.C.; and Mr. Jay
Ritchie, Executive Vice President, Tokio Marine HHC, Kennesaw,
Georgia.
Legislative Action
On February 16, 2017, Rep. Sam Johnson (R-TX) introduced
the Small Business Health Fairness Act of 2017 (H.R. 1101)
along with then-Subcommittee on Health, Employment, Labor, and
Pensions (HELP) Chairman Tim Walberg (R-MI).\7\
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\7\H.R. 1101, 115th Cong. (2017).
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On March 8, 2017, the Committee considered H.R. 1101, the
Small Business Health Fairness Act of 2017.\8\ Then-HELP
Subcommittee Chairman Walberg offered an amendment in the
nature of a substitute, making technical changes to the
introduced bill. The Committee voted to adopt the amendment in
the nature of a substitute by voice vote. Rep. Susan Davis (D-
CA) offered an amendment to prevent the bill from taking effect
under certain circumstances. The amendment failed by a vote of
17 to 22. The Committee favorably reported H.R. 1101, as
amended, to the House of Representatives by a vote of 22 to 17.
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\8\H.R. 1101, Small Business Health Fairness Act of 2017: Markup
Before the H. Comm. on Educ. & the Workforce, 115th Cong. (Mar. 8,
2017).
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On March 22, 2017, the House passed H.R. 1101, the Small
Business Health Fairness Act of 2017 by a vote of 236-175.
Second Session--Hearing
On March 16, 2018, the HELP Subcommittee held a hearing
entitled ``Expanding Affordable Health Care Options: Examining
the Department of Labor's Proposed Rule on Association Health
Plans,'' which examined the U.S. Department of Labor's (DOL)
recent proposed rule on AHPs as an alternative to Obamacare.
Witnesses were Mr. Christopher Condeluci, Principal and Sole
Shareholder, CC Law and Policy PLLC, Washington, D.C.; Mr.
Michael McGrew, CEO McGrew Real Estate, Lawrence, Kansas; Ms.
Catherine Monson, CEO and President, FASTSIGNS International,
Inc., Carrollton, Texas; and Mr. John Arensmeyer, Founder and
CEO, Small Business Majority, Washington, D.C.
117TH CONGRESS
First Session--Hearing
On June 9, 2021, the Committee held a hearing entitled
``Examining the Policies and Priorities of the U.S. Department
of Labor,'' during which the Secretary of Labor was questioned
about the Department's Fiscal Year 2022 budget priorities. The
Committee also examined the Department's views on the Trump
administration's rule to expand AHPs. The sole witness was the
Honorable Martin J. Walsh, Secretary of DOL, Washington, D.C.
Second Session--Hearing
On February 17, 2022, the HELP Subcommittee held a hearing
entitled ``Exploring Pathways to Affordable, Universal Health
Coverage,'' which examined, among other things, the benefits of
expanding AHPs. The witnesses were Dr. Brian Blase, President,
Paragon Health Institute, Ponte Verde, Florida; Dr. Georges C.
Benjamin, Executive Director, the American Public Health
Association, Washington, D.C.; Ms. Katie Keith, Center on
Health Insurance Reforms, Georgetown University, Washington,
D.C.; and Mr. Robert B. Reich, Carmel P. Friesen Professor of
Public Policy, Goldman School of Public Policy, University of
California, Berkley, California.
118TH CONGRESS
First Session--Hearing
On April 26, 2023, the HELP Subcommittee held a hearing
entitled ``Reducing Health Care Costs for Working Americans and
Their Families,'' which examined H.R. 2868, the Association
Health Plans Act, among other proposals, and also examined the
continuing negative impact of the ACA on employer-sponsored
health coverage and on lowering costs by expanding AHPs.
Witnesses were Mr. Joel White, President, Council for
Affordable Health Coverage (CAHC), Washington, D.C.; Mrs. Tracy
Watts, Senior Partner, Mercer, Washington, D.C.; Marcie
Strouse, Partner, Capitol Benefits Group, Des Moines, Iowa; and
Ms. Sabrina Corlette, J.D., Senior Research Professor, Center
on Health Insurance Reforms, Georgetown University's Health
Policy Institute, Washington, D.C.
Legislative Action
On April 25, 2023, Rep. Walberg introduced the Association
Health Plans Act (H.R. 2868) with Chairwoman Foxx, HELP
Subcommittee Chairman Bob Good (R-VA), Rep. Rick Allen (R-GA),
Rep. Dan Crenshaw (R-TX), and Rep. Michael Burgess (R-TX) as
original cosponsors. The bill was referred solely to the
Committee on Education and the Workforce. On June 6, 2023, the
Committee considered H.R. 2868, the Association Health Plans
Act in legislative session and reported it favorably, as
amended, to the House of Representatives by a recorded vote of
23-18. The Committee adopted the following amendment to H.R.
2868: Rep. Walberg offered an Amendment in the Nature of a
Substitute (ANS) clarifying that an organization has to be
actively in existence for two years prior to the establishment
of an AHP in order for the AHP to qualify as a group health
plan under H.R. 2868. In Section 3, the ANS also strikes
``employee welfare benefit plan'' and inserts ``group health
plan'' to clarify that premium rates are for health care only.
Committee Views
INTRODUCTION
Background on employer-sponsored insurance coverage
Since World War II, employers have offered health care
benefits to recruit and retain talent and to ensure a healthy
and productive workforce. Employer-sponsored health insurance
covers almost 159 million American workers and family
members.\9\ According to the U.S. Census Bureau, 54.3 percent
of Americans were covered by employment-based health coverage
in 2021.\10\ When given the option for employment-based health
coverage, 77 percent of workers take up coverage.\11\ Almost
all businesses with at least 200 or more employees offer health
benefits.\12\ According to the Kaiser Family Foundation,
however, smaller firms (with 3 to 199 employees) are
significantly less likely to offer health benefits.\13\ As a
result, in 2022, just over half of all employers offered some
health benefits.\14\
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\9\Kaiser Family Found., Employer Health Benefits: 2022 Annual
Survey, 2022 Employer Health Benefits Survey 58, http://files.kff.org/
attachment/Report-Employer-Health-Benefits-2022-Annual-Survey.pdf.
\10\U.S. Census Bur., U.S. Dep't of Com., Health Insurance Coverage
in the United States: 2021, http://census.gov/content/dam/Census/
library/publications/2022/demo/p60-278.pdf.
\11\Kaiser Family Found., supra note 9, at 12.
\12\Id.
\13\Id.
\14\Id.
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Employer-provided health benefits are regulated by a number
of laws, including ERISA as amended by the ACA. DOL implements
and enforces ERISA. By virtue of its jurisdiction over ERISA,
the Committee has jurisdiction over employer-provided health
coverage.
Small and large employers offer health care coverage to
employees in self-funded arrangements (self-insurance) or
purchase fully insured plans. ERISA regulates both fully
insured and self-insured plans, but only self-insured plans are
exempt from a patchwork of benefit mandates imposed under state
insurance law. Employers sponsoring self-insured plans are not
subject to the same requirements under the ACA as those with
fully insured plans. Therefore, employer-provided plans have
different requirements and costs depending on funding
arrangements. Last year, approximately 65 percent of workers
with employer-sponsored health coverage were enrolled in a
self-funded plan, up from 44 percent in 1999 and 55 percent in
2007.\15\
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\15\Id. at 157.
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Obamacare has failed, proving the need for a better way of providing
access to affordable, quality health care
The ACA attempted to expand access to health insurance
through a complicated structure of federal subsidies, Medicaid
expansion, and new rules governing health insurance markets.
The law has severely damaged America's health care system and
is collapsing under its own weight. For example, President
Obama famously promised the ACA would ``lower premiums by up to
$2,500 for a typical family per year,'' yet the evidence
suggests otherwise.\16\ Additionally, small businesses and
their employees have been ``hurt badly by the cost increases
caused by the ACA.''\17\ Small businesses continue to struggle
with the cost of health care coverage, with adverse impacts to
growth, hiring, and workforce pay.\18\ In June 2022, Kaiser
Family Foundation reported that individual health care debt is
a significant problem in the United States. The same study
reports that half of adults find it difficult to afford health
care and that cost is often a barrier to obtaining needed
health care or filling prescriptions. \19\
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\16\Jess Henig & Lori Robertson, Obama's Inflated Health `Savings',
FactCheck.org, Jun. 16, 2008, http://www.factcheck.org/2008/06/obamas-
inflated-health-savings/.
\17\Rescuing Americans from the Failed Health Care Law and
Advancing Patient-Centered Solutions: Hearing Before the H. Comm. on
Educ. & the Workforce, 115th Cong. 42 (2017) (statement of Scott
Bollenbacher, Managing Partner, Bollenbacher & Assoc., LLC).
\18\Small Bus. for Am. Future, Survey: Health Care Costs Putting
Financial Pressure on Small Business (Oct. 2022), http://irp.cdn-
website.com/b4559992/files/uploaded/
SBAF%20National%20_health_care%20Survey%20Oct.%202022.pdf (reporting
survey results of 1,209 small business owners finding that, to offset
rising health care costs, nearly half increased prices of goods or
services, 38 percent delayed growth opportunities, and 28 percent
slowed hiring).
\19\Alex Montero et al., Kaiser Family Found., Americans'
Challenges with Health Care Costs (July 14, 2022), https://www.kff.org/
health-costs/issue-brief/americans-challenges-with-health-care-costs/
(reporting that 41 percent of adults have medical or dental care debt
owed to credit cards, collections agencies, families and friends,
banks, and other lenders).
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The ACA placed additional mandates and administrative
burdens on employers, increasing the cost of insurance coverage
and making it more difficult to hire workers and grow their
businesses. According to a study by the American Action Forum,
ACA regulations have a significant negative impact on the labor
market. The study concluded that roughly 300,000 small business
jobs were lost, and 10,000 small businesses closed as a result
of ACA's costs and regulations.\20\
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\20\Ben Gitis & Sam Batkins, Update: Obamacare's Impact on Small
Business Wages and Employment, Am. Action Forum (2017), https://
americanactionforum.org/research/update-obamacares-impact-small-
business-wages-employment/.
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In the aftermath of ACA, approximately 36 percent of small
businesses with fewer than 10 employees stopped offering
coverage, leaving workers with even fewer health care
options.\21\ In 2021, the offer rate for businesses with fewer
than 50 employees had dropped to 31.9 percent, compared with 39
percent in 2010 when ACA passed.\22\ Due to their size and
economies of scale, large businesses and labor organizations
have the ability to negotiate on behalf of their employees for
high-quality health care at more affordable costs. By offering
a qualified group health plan under ERISA, these large
employers and labor organizations are also exempt from myriad
state rules and regulations on health insurance. Small
businesses, however, do not have the same bargaining power as
larger businesses and are unable to band together to increase
their bargaining power in the health insurance marketplace.
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\21\Paul Fronstin, EBRI Educ. & Research Fund, Fewer Small
Employers Offering Health Coverage; Large Employers Holding Steady
(2016) (Jul. 2016), http://ebri.org/content/fewer-small-employers-
offering-health-coverage-large-employers-holding-steady-3367 (studying
the impact of the ACA on employer health insurance offer rates).
\22\Agency for Healthcare & Quality, Ctr. for Financing, Access and
Cost Trends 2021 Medical Expenditure Panel Survey-Insurance Component,
Table 1.A.2. (2021), http://meps.ahrq.gov/data_stats/summ_tables/insr/
state/series_2/2021/ic21_iia_f_pdf; Agency for Healthcare & Quality,
Ctr. for Financing, Access and Costs Trends 2010 Medical Expenditure
Panel Survey--Insurance Component, Table I.A.2 (2010), http://
meps.ahrq.gov/data_stats/summ_tables/insr/state/series_2/2010/
9c10_iaa_f.pdf.
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According to a survey released by the National Federation
of Independent Business (NFIB) in March of 2023, 65 percent of
small business employers that do not currently offer coverage
cite the cost of health insurance coverage as the top
reason.\23\ In testimony before the HELP Subcommittee, Mr. Joel
White, President of the Council for Affordable Health Coverage,
stated that ACA mandates applicable to small businesses
increase the cost of providing health care coverage and limit
choices: ``As Congress increased [costs for small businesses]
and limited their choices, the authors of ACA created powerful
incentives for small businesses to drop coverage. And they
did.''\24\
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\23\Holly Wade, Nfib Research Ctr., Small Business Health Insurance
Survey (Mar. 2023), https://strgnfibcom.blob.core.windows.net/nfibcom/
Health-insurance-survey-NFIB.pdf.
\24\Reducing Health Care Costs for Working Americans and Their
Families: Hearing Before the Subcomm. on Health, Employment, Labor &
Pensions of the H. Comm. on Educ. & the Workforce, 118th Cong. (2023)
(statement of Joel White, President, Council for Affordable Health
Coverage).
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One significant factor contributing to the high cost of
health care for small employers is their inability to band
together to unlock the financial benefits of small business
pooling arrangements. These cost-saving benefits--economies of
scale, freedom from state regulation, and increased
administrative efficiencies--would help small employers access
coverage at a more affordable price and decrease the number of
uninsured individuals who work in small businesses. That is
particularly important because, as stated above, the percentage
of smaller firms that offer coverage has fallen from 39 percent
to 31.9 percent since 2010.
To address the damage to small business caused by the ACA,
Mr. White added, ``A good start would be to pass Congressman
Walberg's bill the Association Health Plan Act to ensconce AHPs
in statute, clarify regulatory authority, and expand AHPs as an
option for employers,'' namely, the ability to pool together to
offer health insurance coverage to their employees.
The need for small business pooling
AHPs will give small businesses another option for offering
health insurance coverage. In a statement submitted to the HELP
Subcommittee, 18 organizations comprising the Coalition to
Protect and Promote Association Health Plans (the ``AHP
Coalition'') affirmed the benefits of AHPs, with data from AHPs
demonstrating significant savings to employers in different
industries from five to 35 percent and to participating self-
employed individuals from two to 50 percent.\25\ The AHP
Coalition stated that several beneficial AHPs were
``discontinued due to the legal uncertainty surrounding AHPs''
following an adverse ruling by the U.S. District Court for the
District of Columbia regarding DOL's final regulations of June
18, 2018, expanding AHP coverage.
---------------------------------------------------------------------------
\25\Id. (statement of The Coalition to Protect and Promote
Association Health Plans).
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AHPs allow small businesses to pool risk. Mr. White's
testimony underscores the advantages of risk pooling that AHPs
provide to small businesses:
According to a recent survey from the Small Business
Entrepreneurship Council, only 1 in 5 (17 percent)
small business leaders agree that the employer health
care solutions available to them have kept up with
changing market conditions. In addition, small firms do
not have large pools of employees to spread risk across
broad populations or to reduce administrative costs
associated with offering coverage. One sick person at a
small business can blow a hole in profits and
potentially sink the enterprise.\26\
---------------------------------------------------------------------------
\26\Id. (White statement).
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A key element of H.R. 2868 is that AHPs would have the
ability to self-fund, which in turn would allow small
businesses to band together across state lines to offer
coverage. Self-insuring also allows employers to offer plans
designed to meet the needs of their employees while controlling
costs. These plans provide excellent, well-regulated benefits.
As Mr. White testified, ``To help small businesses across the
country, Congress should protect access to level-funded plans
and reinsurance (including low attachment point reinsurance)
policies by ensuring they remain available for sale and
purchase in all states. This would involve clarifying ERISA
preemption with respect to self-funded arrangements for small
businesses.''\27\ As Mr. Jay Ritchie, Executive Vice President
of Tokio Marine HCC Stop-Loss Group and the Chairman of the
Board of the Self-Insurance Institute of America, Inc.,
testified that ``[s]elf-insurance plans are regulated by no
less than 10 federal laws, including [ERISA] and [HIPAA].''\28\
Larger businesses and unions that are self-funded are regulated
under these rules; prohibiting AHPs from self-funding would
punish small businesses and deny them the same protections.
Further, there is no data to substantiate critics' claims that
self-funded AHPs will have any effect on the fully insured
small group market or the ACA's Small Business Health Options
Program Exchanges.\29\
---------------------------------------------------------------------------
\27\Id. (White statement).
\28\Legislative Proposals to Improve Health Care Coverage and
Provide Lower Costs for Families: Hearing Before the H. Comm on Educ. &
the Workforce, 115th Cong. 42 (2017) (statement of Jay Ritchie, Exec.
Vice President, Tokio Marine HCC).
\29\Id. at 43.
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Some states already allow pooling arrangements within their
state. AHPs remain subject to all federal and state laws
otherwise applicable to such plans, and the provisions of H.R.
2868 are not intended to modify the application or
interpretation of such laws to such plans.
Department of Labor regulation expanding AHPs
On June 21, 2018, DOL issued a final regulation to expand
the groups and associations of employers eligible to sponsor
employment-based health coverage.\30\ The rule was intended to
expand access to affordable, high-quality health care options,
particularly for employees of small employers. On March 28,
2019, the U.S. District Court of the District of Columbia
invalidated key portions of the rule.\31\ An appeal is pending
with the U.S. Court of Appeals for the D.C. Circuit.
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\30\Definition of ``Employer'' Under Section 3(5) of ERISA--
Association Health Plans, 83 Fed. Reg. 28,912 (June 21, 2018).
\31\New York v. DOL, 363 F. Supp. 3d 109 (D.D.C. 2019).
---------------------------------------------------------------------------
In the brief period before the rule was blocked by the
district court, 28 new AHPs were established. Due to the short
period these plans were operating, little data is available.
However, reported savings for the plans averaged 29 percent for
self-funded AHPs and 23 percent for fully insured AHPs.\32\
---------------------------------------------------------------------------
\32\Kev Coleman, Ass'n Health Plans, Inc., First Phase Of New
Association Health Plans Reveal Promising Trends, https://
associationhealthplans.com/reports/new-ahp-study.
---------------------------------------------------------------------------
The federal government's attack on small business owners
On May 31, the Centers for Medicare and Medicaid Services
(CMS) sent a letter to Gov. Glenn Youngkin (R-VA) alleging that
the state is not enforcing certain coverage mandates required
by the ACA.\33\ A 2022 Virginia law allows self-employed
individuals and employees of real estate brokerage firms to
band together to create an AHP.\34\ The letter claims these
groups cannot form AHPs because the definition of employee
organization under ERISA does not allow for the participation
of self-employed individuals. Federal legislation is needed to
expand AHPs in order to help protect access for small business
owners in Virginia and other states.
---------------------------------------------------------------------------
\33\Letter from Chiquita Brooks-LaSure, Ctr. For Medicare &
Medicaid Serv., to Gov. Glenn Youngkin (May 31, 2023), https://
www.cms.gov/files/document/virginia-preliminary-determination-
letter.pdf.
\34\Press Release, Governor Glenn Youngkin Signs Bipartisan
Legislation To Expand Health Care Coverage Options For Virginia's
Realtor Community (June 16, 2022), https://www.governor.virginia.gov/
newsroom/news-releases/2022/june/name-934901-en.html.
---------------------------------------------------------------------------
Support for creating options and flexibility for small businesses
Because it benefits both employers and working families,
AHP legislation has been consistently supported over the years,
including by a broad swath of groups representing job creators,
including: the National Federation of Independent Businesses,
Council for Affordable Coverage, National Association of
REALTORS, the North Carolina Chamber, Associated General
Contractors of America, MLD Foundation, Main Street Freedom
Alliance, National Association of Wholesaler-Distributors,
Small Business & Entrepreneurship Council, the American Farm
Bureau Federation, American Society of Association Executives,
Associated Employers Benefit & Trust; Indiana Credit Union
League, Manufacturer & Business Association, Michigan Business
and Professional Association, Michigan Dental Association,
National Restaurant Association, Small Business Association of
Michigan, and U.S. Chamber of Commerce.
H.R. 2868, THE ASSOCIATION HEALTH PLANS ACT
The Committee is advancing this legislation to expand
access to more affordable health care coverage for small
employers and self-employed individuals by authorizing the
creation of AHPs sponsored by groups or associations of
employers, including self-employed individuals. The legislation
allows small businesses and independent contractors to band
together across state lines through associations for their
workers, thus increasing their bargaining power with plans and
providers and placing them on a more level playing field with
larger companies and unions. H.R. 2868 frees small businesses
from costly state-mandated benefit packages, spreads risk for
self- employed individuals, and lowers overhead costs, enabling
employers to offer more affordable health care coverage to
their workers and self-employed individuals to access more
affordable health care coverage.
CONCLUSION
H.R. 2868, the Association Health Plans Act, makes it
easier for small businesses to promote a healthy workforce and
offer more affordable health care coverage. By allowing small
businesses to join together in AHPs, the bill puts smaller
businesses on a more level playing field with larger companies
and unions, and it increases their bargaining power with
insurance providers. More importantly, it provides smaller
employers--many of whom have limited resources--with a greater
opportunity to offer their workers quality and affordable
health care coverage. If enacted, H.R. 2868 will empower small
businesses to provide quality health care for their employees
and independent contractors to obtain quality affordable health
care coverage.
Summary
H.R. 2868 SECTION-BY-SECTION SUMMARY
Section 1. Short title
Section 1 provides that the short title is ``Association
Health Plans Act.''
Section 2. Treatment of group or association of employers
Section 2 amends the definition of ``employer'' under ERISA
to confirm that a group or association of employers--regardless
of profession or geography--may be considered a single large
employer if the group or association:
Establishes a group health plan;
Includes at least 51 employees;
Has been actively in existence for a minimum
of two years;
Has been formed in good faith for a purpose
other than purchasing insurance;
Has no membership restrictions based on
health status-related factors;
Makes coverage available to all employees
regardless of health status;
Does not offer coverage to anyone outside
the group or association;
Has established a governing board with at
least 75 percent of board members being duly elected by
the employer members participating in the health plan;
and
Is not a health insurance issuer itself or
controlled or owned by a health insurance issuer or its
subsidiary.
For purposes of determining whether the group or
association includes at least 51 employees, all employees of
employer members of the group or association are aggregated and
treated as being employed by a single employer.
Grandfather clause and additional pathways
Section 2 grandfathers existing AHPs by allowing a group or
association to be considered an ``employer'' for purposes of
sponsoring an ERISA-covered health plan if the group or
association (1) satisfies criteria outlined in DOL advisory
opinions issued prior to the enactment of H.R. 2868 or (2)
satisfies any criteria in prospective DOL regulations.
Section 2 allows self-employed individuals to participate
in an ERISA-covered health plan established by a group or
association by treating a self-employed individual as an
``employer'' and an ``employee'' as well as a ``participant''
in the health plan. For these purposes, a self-employed
individual:
Does not have any common-law employees;
Has ownership right in a trade or business;
Earns wages or income from this trade or
business; and
Works at least 10 hours per week or 40 hours
per month.
Section 2 requires that all AHPs have established a
governing board with at least 75 percent of board members duly
elected by the employer members participating in the health
plan. The board shall (1) determine whether a self-employed
individual satisfies the criteria to join a group or
association prior to the individual enrolling in the health
plan and (2) periodically monitor whether an individual
continues to be considered a self-employed individual. If the
board determines that a self-employed individual no longer
satisfies the criteria, the individual and their dependents
will no longer be eligible for coverage (other than COBRA
continuation coverage, if applicable) starting in the next plan
year, although an individual has the right to provide evidence
that he or she continues to meet (or subsequently meets) the
criteria to maintain or restore coverage.
Section 2 also clarifies that participation in an ERISA-
covered plan sponsored by a group or association of employers
is not evidence of joint employment.
Section 3. Rules applicable to employee welfare benefit plans
established and maintained by a group or association of
employers
Section 3 requires that premiums and underwriting be based
on the risk pool of employer groups instead of on an individual
level. A group or association of employers made up solely of
employers with at least one common-law employee (i.e., a group
or association with no self-employed individuals) may develop
premium rates in the following manner:
a. Establish premium rates after considering the collective
health claims experience of all employees and their dependents
participating in the plan.
b. Vary rates up or down for each individual employer
member of the group or association based on the collective
health claims experience of the employees employed by each
respective employer.
A mixed group or association of employers that includes
both employers with at least one common-law employee and self-
employed individuals may develop premium rates in the same
manner as above. However, for purposes of varying the premiums
by the employer member, all self-employed individuals must be
aggregated and counted together as their own single group made
up of at least 20 self-employed individuals. Any premium
variation for this self-employed individual group shall
consider the collective health claims experience of all self-
employed individuals and their dependents in this group.
For a group or association of employers made up solely of
self-employed individuals (i.e., a group or association with no
employers with at least one common-law employee), premium rates
will be developed by considering the collective health claims
experience of all the self-employed individuals and their
dependents participating in the plan. The base rates will then
be charged equally to all self-employed individuals and their
dependents participating in the plan. If the aggregated group
of self-employed individuals is less than 20 individuals, this
group or association cannot permit self-employed individuals to
participate in the plan.
Section 3 reconfirms current law and reiterates that an
ERISA-covered health plan shall: not establish a rule for
eligibility or continued eligibility in the health plan that
discriminates against any participant based on a health status-
related factor; not require any participant to pay a premium
rate that is higher than the premium rate similarly situated
individuals pay based on a health-status-related factor
relating to that participant; and not deny coverage based on a
pre-existing condition.
Section 4. Rules of construction
Section 4 confirms current law and requires an ERISA-
covered health plan to comply with the ACA's group health plan
coverage requirements and ERISA's coverage requirements.
Explanation of Amendments
The amendments, including the amendment in the nature of a
substitute, are explained in the body of this report.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch. H.R. 2868 takes important steps to expand access to
affordable, high-quality healthcare coverage for small
employers and self-employed individuals.
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement of
whether the provisions of the reported bill include unfunded
mandates. This issue will be addressed in the CBO letter.
Earmark Statement
H.R. 2868 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of House rule XXI.
Roll Call Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
Statement of General Performance Goals and Objectives
In accordance with clause (3)(c) of House Rule XIII, the
goal of H.R. 2868, the Association Health Plans Act, is to
improve access to affordable health coverage options for
workers employed by small businesses.
Duplication of Federal Programs
No provision of H.R. 2868 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Statement of Oversight Findings and
Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the committee's oversight findings and recommendations are
reflected in the body of this report.
Required Committee Hearing and Related Hearings
In compliance with clause 3(c)(6) of rule XIII the
following hearing held during the 118th Congress was used to
develop or consider H.R. 2868: On April 24, 2023, the HELP
Subcommittee held a hearing entitled ``Reducing Health Care
Costs for Working Americans and Their Families.''
New Budget Authority and CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairwoman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 2868.
However, clause 3(d)(2)(B) of that rule provides that this
requirement does not apply when, as with the present report,
the committee adopts as its own the cost estimate of the bill
being prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
* * * * * * *
TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS
Subtitle A--General Provisions
* * * * * * *
DEFINITIONS
Sec. 3. For purposes of this title:
(1) The terms ``employee welfare benefit plan'' and ``welfare
plan'' mean any plan, fund, or program which was heretofore or
is hereafter established or maintained by an employer or by an
employee organization, or by both, to the extent that such
plan, fund, or program was established or is maintained for the
purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or otherwise,
(A) medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability, death
or unemployment, or vacation benefits, apprenticeship or other
training programs, or day care centers, scholarship funds, or
prepaid legal services, or (B) any benefit described in section
302(c) of the Labor Management Relations Act, 1947 (other than
pensions on retirement or death, and insurance to provide such
pensions).
(2)(A) Except as provided in subparagraph (B), the terms
``employee pension benefit plan'' and ``pension plan'' mean any
plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that by its express
terms or as a result of surrounding circumstances such plan,
fund, or program--
(i) provides retirement income to employees, or
(ii) results in a deferral of income by employees for
periods extending to the termination of covered
employment or beyond,
regardless of the method of calculating the contributions made
to the plan, the method of calculating the benefits under the
plan or the method of distributing benefits from the plan. A
distribution from a plan, fund, or program shall not be treated
as made in a form other than retirement income or as a
distribution prior to termination of covered employment solely
because such distribution is made to an employee who has
attained age 62 and who is not separated from employment at the
time of such distribution.
(B) The Secretary may by regulation prescribe rules
consistent with the standards and purposes of this Act
providing one or more exempt categories under which--
(i) severance pay arrangements, and
(ii) supplemental retirement income payments, under
which the pension benefits of retirees or their
beneficiaries are supplemented to take into account
some portion or all of the increases in the cost of
living (as determined by the Secretary of Labor) since
retirement,
shall, for purposes of this title, be treated as welfare plans
rather than pension plans. In the case of any arrangement or
payment a principal effect of which is the evasion of the
standards or purposes of this Act applicable to pension plans,
such arrangement or payment shall be treated as a pension plan.
An applicable voluntary early retirement incentive plan (as
defined in section 457(e)(11)(D)(ii) of the Internal Revenue
Code of 1986) making payments or supplements described in
section 457(e)(11)(D)(i) of such Code, and an applicable
employment retention plan (as defined in section 457(f)(4)(C)
of such Code) making payments of benefits described in section
457(f)(4)(A) of such Code, shall, for purposes of this title,
be treated as a welfare plan (and not a pension plan) with
respect to such payments and supplements.
(C) A pooled employer plan shall be treated as--
(i) a single employee pension benefit plan or
single pension plan; and
(ii) a plan to which section 210(a) applies.
(3) The term ``employee benefit plan'' or ``plan'' means an
employee welfare benefit plan or an employee pension benefit
plan or a plan which is both an employee welfare benefit plan
and an employee pension benefit plan.
(4) The term ``employee organization'' means any labor union
or any organization of any kind, or any agency or employee
representation committee, association, group, or plan, in which
employees participate and which exists for the purpose, in
whole or in part, of dealing with employers concerning an
employee benefit plan, or other matters incidental to
employment relationships; or any employees' beneficiary
association organized for the purpose in whole or in part, of
establishing such a plan.
(5) [The term] (A) The term ``employer'' means any person
acting directly as an employer, or indirectly in the interest
of an employer, in relation to an employee benefit plan; and
includes a group or association of employers acting for an
employer in such capacity.
(B) For purposes of subparagraph (A), a group or association
of employers shall be treated as an ``employer'', regardless of
whether the employers composing such group or association are
in the same industry, trade, or profession, if such group or
association--
(i)(I) has established and maintains an employee
welfare benefit plan that is a group health plan (as
defined in section 733(a)(1));
(II) provides coverage under such plan to at
least 51 employees after all of the employees
employed by all of the employer members of such
group or association have been aggregated and
counted together as described in subparagraph
(D);
(III) has been actively in existence for at
least 2 years prior to establishing and
maintaining an employer welfare benefit plan
that is a group health plan (as defined in
section 733(a)(1));
(IV) has been formed and maintained in good
faith for purposes other than providing medical
care (as defined in section 733(a)(2)) through
the purchase of insurance or otherwise;
(V) does not condition membership in the
group or association on any health status-
related factor (as described in section
702(a)(1)) relating to any individual;
(VI) makes coverage under such plan available
to all employer members of such group or
association regardless of any health status-
related factor (as described in section
702(a)(1)) relating to such employer members;
(VII) does not provide coverage under such
plan to any individual other than an employee
of an employer member of such group or
association;
(VIII) has established a governing board with
by-laws or other similar indications of
formality to manage and operate such plan in
both form and substance, of which at least 75
percent of the board members shall be made up
of employer members of such group or
association participating in the plan that are
duly elected by each participating employer
member casting 1 vote during a scheduled
election;
(IX) is not a health insurance issuer (as
defined in section 733(b)(2)), and is not owned
or controlled by such a health insurance issuer
or by a subsidiary or affiliate of such a
health insurance issuer, other than to the
extent such a health insurance issuer--
(aa) may participate in the group or
association as a member; and
(bb) may provide services such as
assistance with plan development,
marketing, and administrative services
to such group or association;
(ii) meets any set of criteria to qualify for such
treatment in an advisory opinion issued by the
Secretary prior to the date of enactment of the
Association Health Plans Act; or
(iii) meets any other set of criteria to qualify for
such treatment that the Secretary by regulation may
provide.
(C)(i) For purposes of subparagraph (B), a self-employed
individual shall be treated as--
(I) an employer who may become a member of a
group or association of employers;
(II) an employee who may participate in an
employee welfare benefit plan established and
maintained by such group or association; and
(III) a participant of such plan subject to
the eligibility determination and monitoring
requirements set forth in clause (iii).
(ii) For purposes of this subparagraph, the
term ``self-employed individual'' means an
individual who--
(I) does not have any common law
employees;
(II) has an ownership right in a
trade or business, regardless of
whether such trade or business is
incorporated or unincorporated;
(III) earns wages (as defined in
section 3121(a) of the Internal Revenue
Code of 1986) or self-employment income
(as defined in section 1402(b) of such
Code) from such trade or business; and
(IV) works at least 10 hours per week
or 40 hours per month providing
personal services to such trade or
business.
(iii) The board of a group or association of
employers shall--
(I) initially determine whether an
individual meets the requirements under
clause (ii) to be considered a self-
employed individual for the purposes of
being treated as an--
(aa) employer member of such
group or association (in
accordance with clause (i)(I));
and
(bb) employee who may
participate in the employee
welfare benefit plan
established and maintained by
such group or association (in
accordance with clause
(i)(II));
(II) through reasonable monitoring
procedures, periodically determine
whether the individual continues to
meet such requirements; and
(III) if the board determines that an
individual no longer meets such
requirements, not make such plan
coverage available to such individual
(or dependents thereof) for any plan
year following the plan year during
which the board makes such
determination. If, subsequent to a
determination that an individual no
longer meets such requirements, such
individual furnishes evidence of
satisfying such requirements, such
individual (and dependents thereof)
shall be eligible to receive plan
coverage.
(D) For purposes of subparagraph (B), all of the employees
(including self-employed individuals) employed by all of the
employer members (including self-employed individuals) of a
group or association of employers shall be--
(i) treated as employed by a single employer; and
(ii) aggregated and counted together for purposes of
any regulation of an employee welfare benefit plan
established and maintained by such group or
association.
(6) The term ``employee'' means any individual employed by an
employer.
(7) The term ``participant'' means any employee or former
employee of an employer, or any member or former member of an
employee organization, who is or may become eligible to receive
a benefit of any type from an employee benefit plan which
covers employees of such employer or members of such
organization, or whose beneficiaries may be eligible to receive
any such benefit.
(8) The term ``beneficiary'' means a person designated by a
participant, or by the terms of an employee benefit plan, who
is or may become entitled to a benefit thereunder.
(9) The term ``person'' means an individual, partnership,
joint venture, corporation, mutual company, joint-stock
company, trust, estate, unincorporated organization,
association, or employee organization.
(10) The term ``State'' includes any State of the United
States, the District of Columbia, Puerto Rico, the Virgin
Islands, American Samoa, Guam, Wake Island, and the Canal Zone.
The term ``United States'' when used in the geographic sense
means the States and the Outer Continental Shelf lands defined
in the Outer Continental Shelf Lands Act (43 U.S.C. 1331-1343).
(11) The term ``commerce'' means trade, traffic, commerce,
transportation, or communication between any State and any
place outside thereof.
(12) The term ``industry or activity affecting commerce''
means any activity, business, or industry in commerce or in
which a labor dispute would hinder or obstruct commerce or the
free flow of commerce, and includes any activity or industry
``affecting commerce'' within the meaning of the Labor
Management Relations Act, 1947, or the Railway Labor Act.
(13) The term ``Secretary'' means the Secretary of Labor.
(14) The term ``party in interest'' means, as to an employee
benefit plan--
(A) any fiduciary (including, but not limited to, any
administrator, officer, trustee, or custodian),
counsel, or employee of such employee benefit plan;
(B) a person providing services to such plan;
(C) an employer any of whose employees are covered by
such plan;
(D) an employee organization any of whose members are
covered by such plan;
(E) an owner, direct or indirect, of 50 percent or
more of--
(i) the combined voting power of all classes
of stock entitled to vote or the total value of
shares of all classes of stock of a
corporation,
(ii) the capital interest or the profits
interest of a partnership, or
(iii) the beneficial interest of a trust or
unincorporated enterprise,
which is an employer or an employee organization
described in subparagraph (C) or (D);
(F) a relative (as defined in paragraph (15)) of any
individual described in subparagraph (A), (B), (C), or
(E);
(G) a corporation, partnership, or trust or estate of
which (or in which) 50 percent or more of--
(i) the combined voting power of all classes
of stock entitled to vote or the total value of
shares of all classes of stock of such
corporation,
(ii) the capital interest or profits interest
of such partnership, or
(iii) the beneficial interest of such trust
or estate,
is owned directly or indirectly, or held by persons
described in subparagraph (A), (B), (C), (D), or (E);
(H) an employee, officer, director (or an individual
having powers or responsibilities similar to those of
officers or directors), or a 10 percent or more
shareholder directly or indirectly, of a person
described in subparagraph (B), (C), (D), (E), or (G),
or of the employee benefit plan; or
(I) a 10 percent or more (directly or indirectly in
capital or profits) partner or joint venturer of a
person described in subparagraph (B), (C), (D), (E), or
(G).
The Secretary, after consultation and coordination with the
Secretary of the Treasury, may by regulation prescribe a
percentage lower than 50 percent for subparagraph (E) and (G)
and lower than 10 percent for subparagraph (H) or (I). The
Secretary may prescribe regulations for determining the
ownership (direct or indirect) of profits and beneficial
interests, and the manner in which indirect stockholdings are
taken into account. Any person who is a party in interest with
respect to a plan to which a trust described in section
501(c)(22) of the Internal Revenue Code of 1986 is permitted to
make payments under section 4223 shall be treated as a party in
interest with respect to such trust.
(15) The term ``relative'' means a spouse, ancestor, lineal
descendant, or spouse of a lineal descendant.
(16)(A) The term ``administrator'' means--
(i) the person specifically so designated by the
terms of the instrument under which the plan is
operated;
(ii) if an administrator is not so designated, the
plan sponsor; or
(iii) in the case of a plan for which an
administrator is not designated and a plan sponsor
cannot be identified, such other person as the
Secretary may by regulation prescribe.
(B) The term ``plan sponsor'' means (i) the employer in the
case of an employee benefit plan established or maintained by a
single employer, (ii) the employee organization in the case of
a plan established or maintained by an employee organization,
(iii) in the case of a plan established or maintained by two or
more employers or jointly by one or more employers and one or
more employee organizations, the association, committee, joint
board of trustees, or other similar group of representatives of
the parties who establish or maintain the plan, or (iv) in the
case of a pooled employer plan, the pooled plan provider.
(17) The term ``separate account'' means an account
established or maintained by an insurance company under which
income, gains, and losses, whether or not realized, from assets
allocated to such account, are, in accordance with the
applicable contract, credited to or charged against such
account without regard to other income, gains, or losses of the
insurance company.
(18) The term ``adequate consideration'' when used in part 4
of subtitle B means (A) in the case of a security for which
there is a generally recognized market, either (i) the price of
the security prevailing on a national securities exchange which
is registered under section 6 of the Securities Exchange Act of
1934, or (ii) if the security is not traded on such a national
securities exchange, a price not less favorable to the plan
than the offering price for the security as established by the
current bid and asked prices quoted by persons independent of
the issuer and of any party in interest; and (B) in the case of
an asset other than a security for which there is a generally
recognized market, the fair market value of the asset as
determined in good faith by the trustee or named fiduciary
pursuant to the terms of the plan and in accordance with
regulations promulgated by the Secretary.
(19) The term ``nonforfeitable'' when used with respect to a
pension benefit or right means a claim obtained by a
participant or his beneficiary to that part of an immediate or
deferred benefit under a pension plan which arises from the
participant's service, which is unconditional, and which is
legally enforceable against the plan. For purposes of this
paragraph, a right to an accrued benefit derived from employer
contributions shall not be treated as forfeitable merely
because the plan contains a provision described in section
203(a)(3).
(20) The term ``security'' has the same meaning as such term
has under section 2(1) of the Securities Act of 1933 (15 U.S.C.
77b(1)).
(21)(A) Except as otherwise provided in subparagraph (B), a
person is a fiduciary with respect to a plan to the extent (i)
he exercises any discretionary authority or discretionary
control respecting management of such plan or exercises any
authority or control respecting management or disposition of
its assets, (ii) he renders investment advice for a fee or
other compensation, direct or indirect, with respect to any
moneys or other property of such plan, or has any authority or
responsibility to do so, or (iii) he has any discretionary
authority or discretionary responsibility in the administration
of such plan. Such term includes any person designated under
section 405(c)(1)(B).
(B) If any money or other property of an employee benefit
plan is invested in securities issued by an investment company
registered under the Investment Company Act of 1940, such
investment shall not by itself cause such investment company or
such investment company's investment adviser or principal
underwriter to be deemed to be a fiduciary or a party in
interest as those terms are defined in this title, except
insofar as such investment company or its investment adviser or
principal underwriter acts in connection with an employee
benefit plan covering employees of the investment company, the
investment adviser, or its principal underwriter. Nothing
contained in this subparagraph shall limit the duties imposed
on such investment company, investment adviser, or principal
underwriter by any other law.
(22) The term ``normal retirement benefit'' means the greater
of the early retirement benefit under the plan, or the benefit
under the plan commencing at normal retirement age. The normal
retirement benefit shall be determined without regard to--
(A) medical benefits, and
(B) disability benefits not in excess of the
qualified disability benefit.
For purposes of this paragraph, a qualified disability benefit
is a disability benefit provided by a plan which does not
exceed the benefit which would be provided for the participant
if he separated from the service at normal retirement age. For
purposes of this paragraph, the early retirement benefit under
a plan shall be determined without regard to any benefit under
the plan which the Secretary of the Treasury finds to be a
benefit described in section 204(b)(1)(G).
(23) The term ``accrued benefit'' means--
(A) in the case of a defined benefit plan, the
individual's accrued benefit determined under the plan
and, except as provided in section 204(c)(3), expressed
in the form of an annual benefit commencing at normal
retirement age, or
(B) in the case of a plan which is an individual
account plan, the balance of the individual's account.
The accrued benefit of an employee shall not be less than the
amount determined under section 204(c)(2)(B) with respect to
the employee's accumulated contribution.
(24) The term ``normal retirement age'' means the earlier
of--
(A) the time a plan participant attains normal
retirement age under the plan, or
(B) the later of--
(i) the time a plan participant attains age
65, or
(ii) the 5th anniversary of the time a plan
participant commenced participation in the
plan.
(25) The term ``vested liabilities'' means the present value
of the immediate or deferred benefits available at normal
retirement age for participants and their beneficiaries which
are nonforfeitable.
(26) The term ``current value'' means fair market value where
available and otherwise the fair value as determined in good
faith by a trustee or a named fiduciary (as defined in section
402(a)(2)) pursuant to the terms of the plan and in accordance
with regulations of the Secretary, assuming an orderly
liquidation at the time of such determination.
(27) The term ``present value'', with respect to a liability,
means the value adjusted to reflect anticipated events. Such
adjustments shall conform to such regulations as the Secretary
of the Treasury may prescribe.
(28) The term ``normal service cost'' or ``normal cost''
means the annual cost of future pension benefits and
administrative expenses assigned, under an actuarial cost
method, to years subsequent to a particular valuation date of a
pension plan. The Secretary of the Treasury may prescribe
regulations to carry out this paragraph.
(29) The term ``accrued liability'' means the excess of the
present value, as of a particular valuation date of a pension
plan, of the projected future benefit costs and administrative
expenses for all plan participants and beneficiaries over the
present value of future contributions for the normal cost of
all applicable plan participants and beneficiaries. The
Secretary of the Treasury may prescribe regulations to carry
out this paragraph.
(30) The term ``unfunded accrued liability'' means the excess
of the accrued liability, under an actuarial cost method which
so provides, over the present value of the assets of a pension
plan. The Secretary of the Treasury may prescribe regulations
to carry out this paragraph.
(31) The term ``advance funding actuarial cost method'' or
``actuarial cost method'' means a recognized actuarial
technique utilized for establishing the amount and incidence of
the annual actuarial cost of pension plan benefits and
expenses. Acceptable actuarial cost methods shall include the
accrued benefit cost method (unit credit method), the entry age
normal cost method, the individual level premium cost method,
the aggregate cost method, the attained age normal cost method,
and the frozen initial liability cost method. The terminal
funding cost method and the current funding (pay-as-you-go)
cost method are not acceptable actuarial cost methods. The
Secretary of the Treasury shall issue regulations to further
define acceptable actuarial cost methods.
(32) The term ``governmental plan'' means a plan established
or maintained for its employees by the Government of the United
States, by the government of any State or political subdivision
thereof, or by any agency or instrumentality of any of the
foregoing. The term ``governmental plan'' also includes any
plan to which the Railroad Retirement Act of 1935 or 1937
applies, and which is financed by contributions required under
that Act and any plan of an international organization which is
exempt from taxation under the provisions of the International
Organizations Immunities Act (59 Stat. 669). The term
``governmental plan'' includes a plan which is established and
maintained by an Indian tribal government (as defined in
section 7701(a)(40) of the Internal Revenue Code of 1986), a
subdivision of an Indian tribal government (determined in
accordance with section 7871(d) of such Code), or an agency or
instrumentality of either, and all of the participants of which
are employees of such entity substantially all of whose
services as such an employee are in the performance of
essential governmental functions but not in the performance of
commercial activities (whether or not an essential government
function)
(33)(A) The term ``church plan'' means a plan established and
maintained (to the extent required in clause (ii) of
subparagraph (B)) for its employees (or their beneficiaries) by
a church or by a convention or association of churches which is
exempt from tax under section 501 of the Internal Revenue Code
of 1986.
(B) The term ``church plan'' does not include a plan--
(i) which is established and maintained primarily for
the benefit of employees (or their beneficiaries) of
such church or convention or association of churches
who are employed in connection with one or more
unrelated trades or businesses (within the meaning of
section 513 of the Internal Revenue Code of 1986), or
(ii) if less than substantially all of the
individuals included in the plan are individuals
described in subparagraph (A) or in clause (ii) of
subparagraph (C) (or their beneficiaries).
(C) For purposes of this paragraph--
(i) A plan established and maintained for its
employees (or their beneficiaries) by a church or by a
convention or association of churches includes a plan
maintained by an organization, whether a civil law
corporation or otherwise, the principal purpose or
function of which is the administration or funding of a
plan or program for the provision of retirement
benefits or welfare benefits, or both, for the
employees of a church or a convention or association of
churches, if such organization is controlled by or
associated with a church or a convention or association
of churches.
(ii) The term employee of a church or a convention or
association of churches includes--
(I) a duly ordained, commissioned, or
licensed minister of a church in the exercise
of his ministry, regardless of the source of
his compensation;
(II) an employee of an organization, whether
a civil law corporation or otherwise, which is
exempt from tax under section 501 of the
Internal Revenue Code of 1986 and which is
controlled by or associated with a church or a
convention or association of churches; and
(III) an individual described in clause (v).
(iii) A church or a convention or association of
churches which is exempt from tax under section 501 of
the Internal Revenue Code of 1986 shall be deemed the
employer of any individual included as an employee
under clause (ii).
(iv) An organization, whether a civil law corporation
or otherwise, is associated with a church or a
convention or association of churches if it shares
common religious bonds and convictions with that church
or convention or association of churches.
(v) If an employee who is included in a church plan
separates from the service of a church or a convention
or association of churches or an organization, whether
a civil law corporation or otherwise, which is exempt
from tax under section 501 of the Internal Revenue Code
of 1986 and which is controlled by or associated with a
church or a convention or association of churches, the
church plan shall not fail to meet the requirements of
this paragraph merely because the plan--
(I) retains the employee's accrued benefit or
account for the payment of benefits to the
employee or his beneficiaries pursuant to the
terms of the plan; or
(II) receives contributions on the employee's
behalf after the employee's separation from
such service, but only for a period of 5 years
after such separation, unless the employee is
disabled (within the meaning of the disability
provisions of the church plan or, if there are
no such provisions in the church plan, within
the meaning of section 72(m)(7) of the Internal
Revenue Code of 1986) at the time of such
separation from service.
(D)(i) If a plan established and maintained for its employees
(or their beneficiaries) by a church or by a convention or
association of churches which is exempt from tax under section
501 of the Internal Revenue Code of 1986 fails to meet one or
more of the requirements of this paragraph and corrects its
failure to meet such requirements within the correction period,
the plan shall be deemed to meet the requirements of this
paragraph for the year in which the correction was made and for
all prior years.
(ii) If a correction is not made within the correction
period, the plan shall be deemed not to meet the requirements
of this paragraph beginning with the date on which the earliest
failure to meet one or more of such requirements occurred.
(iii) For purposes of this subparagraph, the term
``correction period'' means--
(I) the period ending 270 days after the date of
mailing by the Secretary of the Treasury of a notice of
default with respect to the plan's failure to meet one
or more of the requirements of this paragraph; or
(II) any period set by a court of competent
jurisdiction after a final determination that the plan
fails to meet such requirements, or, if the court does
not specify such period, any reasonable period
determined by the Secretary of the Treasury on the
basis of all the facts and circumstances, but in any
event not less than 270 days after the determination
has become final; or
(III) any additional period which the Secretary of
the Treasury determines is reasonable or necessary for
the correction of the default,
whichever has the latest ending date.
(34) The term ``individual account plan'' or ``defined
contribution plan'' means a pension plan which provides for an
individual account for each participant and for benefits based
solely upon the amount contributed to the participant's
account, and any income, expenses, gains and losses, and any
forfeitures of accounts of other participants which may be
allocated to such participant's account.
(35) The term ``defined benefit plan'' means a pension plan
other than an individual account plan; except that a pension
plan which is not an individual account plan and which provides
a benefit derived from employer contributions which is based
partly on the balance of the separate account of a
participant--
(A) for the purposes of section 202, shall be treated
as an individual account plan, and
(B) for the purposes of paragraph (23) of this
section and section 204, shall be treated as an
individual account plan to the extent benefits are
based upon the separate account of a participant and as
a defined benefit plan with respect to the remaining
portion of benefits under the plan.
(36) The term ``excess benefit plan'' means a plan maintained
by an employer solely for the purpose of providing benefits for
certain employees in excess of the limitations on contributions
and benefits imposed by section 415 of the Internal Revenue
Code of 1986 on plans to which that section applies, without
regard to whether the plan is funded. To the extent that a
separable part of a plan (as determined by the Secretary of
Labor) maintained by an employer is maintained for such
purpose, that part shall be treated as a separate plan which is
an excess benefit plan.
(37)(A) The term ``multiemployer plan'' means a plan--
(i) to which more than one employer is required to
contribute,
(ii) which is maintained pursuant to one or more
collective bargaining agreements between one or more
employee organizations and more than one employer, and
(iii) which satisfies such other requirements as the
Secretary may prescribe by regulation.
(B) For purposes of this paragraph, all trades or businesses
(whether or not incorporated) which are under common control
within the meaning of section 4001(b)(1) are considered a
single employer.
(C) Notwithstanding subparagraph (A), a plan is a
multiemployer plan on and after its termination date if the
plan was a multiemployer plan under this paragraph for the plan
year preceding its termination date.
(D) For purposes of this title, notwithstanding the preceding
provisions of this paragraph, for any plan year which began
before the date of the enactment of the Multiemployer Pension
Plan Amendments Act of 1980, the term ``multiemployer plan''
means a plan described in section 3(37) of this Act as in
effect immediately before such date.
(E) Within one year after the date of the enactment of the
Multiemployer Pension Plan Amendments Act of 1980, a
multiemployer plan may irrevocably elect, pursuant to
procedures established by the corporation and subject to the
provisions of sections 4403(b) and (c), that the plan shall not
be treated as a multiemployer plan for all purposes under this
Act or the Internal Revenue Code of 1954 if for each of the
last 3 plan years ending prior to the effective date of the
Multiemployer Pension Plan Amendments Act of 1980--
(i) the plan was not a multiemployer plan because the
plan was not a plan described in section 3(37)(A)(iii)
of this Act and section 414(f)(1)(C) of the Internal
Revenue Code of 1954 (as such provisions were in effect
on the day before the date of the enactment of the
Multiemployer Pension Plan Amendments Act of 1980 );
and
(ii) the plan had been identified as a plan that was
not a multiemployer plan in substantially all its
filings with the corporation, the Secretary of Labor
and the Secretary of the Treasury.
(F)(i) For purposes of this title a qualified football
coaches plan--
(I) shall be treated as a multiemployer plan to the
extent not inconsistent with the purposes of this
subparagraph; and
(II) notwithstanding section 401(k)(4)(B) of the
Internal Revenue Code of 1986, may include a qualified
cash and deferred arrangement.
(ii) For purposes of this subparagraph, the term ``qualified
football coaches plan'' means any defined contribution plan
which is established and maintained by an organization--
(I) which is described in section 501(c) of such
Code;
(II) the membership of which consists entirely of
individuals who primarily coach football as full-time
employees of 4-year colleges or universities described
in section 170(b)(1)(A)(ii) of such Code; and
(III) which was in existence on September 18, 1986.
(G)(i) Within 1 year after the enactment of the
Pension Protection Act of 2006--
(I) an election under subparagraph (E) may be
revoked, pursuant to procedures prescribed by
the Pension Benefit Guaranty Corporation, if,
for each of the 3 plan years prior to the date
of the enactment of that Act, the plan would
have been a multiemployer plan but for the
election under subparagraph (E), and
(II) a plan that meets the criteria in
clauses (i) and (ii) of subparagraph (A) of
this paragraph or that is described in clause
(vi) may, pursuant to procedures prescribed by
the Pension Benefit Guaranty Corporation, elect
to be a multiemployer plan, if--
(aa) for each of the 3 plan years
immediately preceding the first plan
year for which the election under this
paragraph is effective with respect to
the plan, the plan has met those
criteria or is so described,
(bb) substantially all of the plan's
employer contributions for each of
those plan years were made or required
to be made by organizations that were
exempt from tax under section 501 of
the Internal Revenue Code of 1986, and
(cc) the plan was established prior
to September 2, 1974.
(ii) An election under this subparagraph shall be
effective for all purposes under this Act and under the
Internal Revenue Code of 1986, starting with any plan
year beginning on or after January 1, 1999, and ending
before January 1, 2008, as designated by the plan in
the election made under clause (i)(II).
(iii) Once made, an election under this subparagraph
shall be irrevocable, except that a plan described in
clause (i)(II) shall cease to be a multiemployer plan
as of the plan year beginning immediately after the
first plan year for which the majority of its employer
contributions were made or required to be made by
organizations that were not exempt from tax under
section 501 of the Internal Revenue Code of 1986.
(iv) The fact that a plan makes an election under
clause (i)(II) does not imply that the plan was not a
multiemployer plan prior to the date of the election or
would not be a multiemployer plan without regard to the
election.
(v)(I) No later than 30 days before an election is
made under this subparagraph, the plan administrator
shall provide notice of the pending election to each
plan participant and beneficiary, each labor
organization representing such participants or
beneficiaries, and each employer that has an obligation
to contribute to the plan, describing the principal
differences between the guarantee programs under title
IV and the benefit restrictions under this title for
single employer and multiemployer plans, along with
such other information as the plan administrator
chooses to include.
(II) Within 180 days after the date of enactment of
the Pension Protection Act of 2006, the Secretary shall
prescribe a model notice under this clause.
(III) A plan administrator's failure to provide the
notice required under this subparagraph shall be
treated for purposes of section 502(c)(2) as a failure
or refusal by the plan administrator to file the annual
report required to be filed with the Secretary under
section 101(b)(1).
(vi) A plan is described in this clause if it is a
plan sponsored by an organization which is described in
section 501(c)(5) of the Internal Revenue Code of 1986
and exempt from tax under section 501(a) of such Code
and which was established in Chicago, Illinois, on
August 12, 1881.
(vii) For purposes of this Act and the Internal Revenue Code
of 1986, a plan making an election under this subparagraph
shall be treated as maintained pursuant to a collective
bargaining agreement if a collective bargaining agreement,
expressly or otherwise, provides for or permits employer
contributions to the plan by one or more employers that are
signatory to such agreement, or participation in the plan by
one or more employees of an employer that is signatory to such
agreement, regardless of whether the plan was created,
established, or maintained for such employees by virtue of
another document that is not a collective bargaining agreement.
(38) The term ``investment manager'' means any fiduciary
(other than a trustee or named fiduciary, as defined in section
402(a)(2))--
(A) who has the power to manage, acquire, or dispose
of any asset of a plan;
(B) who (i) is registered as an investment adviser
under the Investment Advisers Act of 1940; (ii) is not
registered as an investment adviser under such Act by
reason of paragraph (1) of section 203A(a) of such Act,
is registered as an investment adviser under the laws
of the State (referred to in such paragraph (1)) in
which it maintains its principal office and place of
business, and, at the time the fiduciary last filed the
registration form most recently filed by the fiduciary
with such State in order to maintain the fiduciary's
registration under the laws of such State, also filed a
copy of such form with the Secretary; (iii) is a bank,
as defined in that Act; or (iv) is an insurance company
qualified to perform services described in subparagraph
(A) under the laws of more than one State; and
(C) has acknowledged in writing that he is a
fiduciary with respect to the plan.
(39) The terms ``plan year'' and ``fiscal year of the plan''
mean, with respect to a plan, the calendar, policy, or fiscal
year on which the records of the plan are kept.
(40)(A) The term ``multiple employer welfare arrangement''
means an employee welfare benefit plan, or any other
arrangement (other than an employee welfare benefit plan),
which is established or maintained for the purpose of offering
or providing any benefit described in paragraph (1) to the
employees of two or more employers (including one or more self-
employed individuals), or to their beneficiaries, except that
such term does not include any such plan or other arrangement
which is established or maintained--
(i) under or pursuant to one or more agreements which
the Secretary finds to be collective bargaining
agreements,
(ii) by a rural electric cooperative, or
(iii) by a rural telephone cooperative association.
(B) For purposes of this paragraph--
(i) two or more trades or businesses, whether or not
incorporated, shall be deemed a single employer if such
trades or businesses are within the same control group,
(ii) the term ``control group'' means a group of
trades or businesses under common control,
(iii) the determination of whether a trade or
business is under ``common control'' with another trade
or business shall be determined under regulations of
the Secretary applying principles similar to the
principles applied in determining whether employees of
two or more trades or businesses are treated as
employed by a single employer under section 4001(b),
except that, for purposes of this paragraph, common
control shall not be based on an interest of less than
25 percent,
(iv) the term ``rural electric cooperative'' means--
(I) any organization which is exempt from tax
under section 501(a) of the Internal Revenue
Code of 1986 and which is engaged primarily in
providing electric service on a mutual or
cooperative basis, and
(II) any organization described in paragraph
(4) or (6) of section 501(c) of the Internal
Revenue Code of 1986 which is exempt from tax
under section 501(a) of such Code and at least
80 percent of the members of which are
organizations described in subclause (I), and
(v) the term ``rural telephone cooperative
association'' means an organization described in
paragraph (4) or (6) of section 501(c) of the Internal
Revenue Code of 1986 which is exempt from tax under
section 501(a) of such Code and at least 80 percent of
the members of which are organizations engaged
primarily in providing telephone service to rural areas
of the United States on a mutual, cooperative, or other
basis.
(41) Single-employer plan.--The term ``single-employer plan''
means an employee benefit plan other than a multiemployer plan.
(42) the term ``plan assets'' means plan assets as defined by
such regulations as the Secretary may prescribe, except that
under such regulations the assets of any entity shall not be
treated as plan assets if, immediately after the most recent
acquisition of any equity interest in the entity, less than 25
percent of the total value of each class of equity interest in
the entity is held by benefit plan investors. For purposes of
determinations pursuant to this paragraph, the value of any
equity interest held by a person (other than such a benefit
plan investor) who has discretionary authority or control with
respect to the assets of the entity or any person who provides
investment advice for a fee (direct or indirect) with respect
to such assets, or any affiliate of such a person, shall be
disregarded for purposes of calculating the 25 percent
threshold. An entity shall be considered to hold plan assets
only to the extent of the percentage of the equity interest
held by benefit plan investors. For purposes of this paragraph,
the term ``benefit plan investor'' means an employee benefit
plan subject to part 4, any plan to which section 4975 of the
Internal Revenue Code of 1986 applies, and any entity whose
underlying assets include plan assets by reason of a plan's
investment in such entity.
(43) Pooled employer plan.--
(A) In general.--The term ``pooled employer
plan'' means a plan--
(i) which is an individual account
plan established or maintained for the
purpose of providing benefits to the
employees of 2 or more employers;
(ii) which is a plan described in
section 401(a) of the Internal Revenue
Code of 1986 which includes a trust
exempt from tax under section 501(a) of
such Code, a plan that consists of
annuity contracts described in section
403(b) of such Code, or a plan that
consists of individual retirement
accounts described in section 408 of
such Code (including by reason of
subsection (c) thereof); and
(iii) the terms of which meet the
requirements of subparagraph (B).
Such term shall not include a plan maintained
by employers which have a common interest other
than having adopted the plan, but such term
shall include any plan (other than a plan
excepted from the application of this title by
section 4(b)(2)) maintained for the benefit of
the employees of more than 1 employer that
consists of annuity contracts described in
section 403(b) of such Code and that meets the
requirements of subparagraph (B) of section
413(e)(1) of such Code.
(B) Requirements for plan terms.--The
requirements of this subparagraph are met with
respect to any plan if the terms of the plan--
(i) designate a pooled plan provider
and provide that the pooled plan
provider is a named fiduciary of the
plan;
(ii) designate a named fiduciary
(other than an employer in the plan) to
be responsible for collecting
contributions to the plan and require
such fiduciary to implement written
contribution collection procedures that
are reasonable, diligent, and
systematic;
(iii) provide that each employer in
the plan retains fiduciary
responsibility for--
(I) the selection and
monitoring in accordance with
section 404(a) of the person
designated as the pooled plan
provider and any other person
who, in addition to the pooled
plan provider, is designated as
a named fiduciary of the plan;
and
(II) to the extent not
otherwise delegated to another
fiduciary by the pooled plan
provider and subject to the
provisions of section 404(c),
the investment and management
of the portion of the plan's
assets attributable to the
employees of the employer (or
beneficiaries of such
employees);
(iv) provide that employers in the
plan, and participants and
beneficiaries, are not subject to
unreasonable restrictions, fees, or
penalties with regard to ceasing
participation, receipt of
distributions, or otherwise
transferring assets of the plan in
accordance with section 208 or
paragraph (44)(C)(i)(II);
(v) require--
(I) the pooled plan provider
to provide to employers in the
plan any disclosures or other
information which the Secretary
may require, including any
disclosures or other
information to facilitate the
selection or any monitoring of
the pooled plan provider by
employers in the plan; and
(II) each employer in the
plan to take such actions as
the Secretary or the pooled
plan provider determines are
necessary to administer the
plan or for the plan to meet
any requirement applicable
under this Act or the Internal
Revenue Code of 1986 to a plan
described in section 401(a) of
such Code, a plan that consists
of annuity contracts described
in section 403(b) of such Code,
or to a plan that consists of
individual retirement accounts
described in section 408 of
such Code (including by reason
of subsection (c) thereof),
whichever is applicable,
including providing any
disclosures or other
information which the Secretary
may require or which the pooled
plan provider otherwise
determines are necessary to
administer the plan or to allow
the plan to meet such
requirements; and
(vi) provide that any disclosure or
other information required to be
provided under clause (v) may be
provided in electronic form and will be
designed to ensure only reasonable
costs are imposed on pooled plan
providers and employers in the plan.
(C) Exceptions.--The term ``pooled employer
plan'' does not include--
(i) a multiemployer plan; or
(ii) a plan established before the
date of the enactment of the Setting
Every Community Up for Retirement
Enhancement Act of 2019 unless the plan
administrator elects that the plan will
be treated as a pooled employer plan
and the plan meets the requirements of
this title applicable to a pooled
employer plan established on or after
such date.
(D) Treatment of employers as plan
sponsors.--Except with respect to the
administrative duties of the pooled plan
provider described in paragraph (44)(A)(i),
each employer in a pooled employer plan shall
be treated as the plan sponsor with respect to
the portion of the plan attributable to
employees of such employer (or beneficiaries of
such employees).
(44) Pooled plan provider.--
(A) In general.--The term ``pooled plan
provider'' means a person who--
(i) is designated by the terms of a
pooled employer plan as a named
fiduciary, as the plan administrator,
and as the person responsible for the
performance of all administrative
duties (including conducting proper
testing with respect to the plan and
the employees of each employer in the
plan) which are reasonably necessary to
ensure that--
(I) the plan meets any
requirement applicable under
this Act or the Internal
Revenue Code of 1986 to a plan
described in section 401(a) of
such Code, a plan that consists
of annuity contracts described
in section 403(b) of such Code,
or to a plan that consists of
individual retirement accounts
described in section 408 of
such Code (including by reason
of subsection (c) thereof),
whichever is applicable; and
(II) each employer in the
plan takes such actions as the
Secretary or pooled plan
provider determines are
necessary for the plan to meet
the requirements described in
subclause (I), including
providing the disclosures and
information described in
paragraph (43)(B)(v)(II);
(ii) registers as a pooled plan
provider with the Secretary, and
provides to the Secretary such other
information as the Secretary may
require, before beginning operations as
a pooled plan provider;
(iii) acknowledges in writing that
such person is a named fiduciary, and
the plan administrator, with respect to
the pooled employer plan; and
(iv) is responsible for ensuring that
all persons who handle assets of, or
who are fiduciaries of, the pooled
employer plan are bonded in accordance
with section 412.
(B) Audits, examinations and
investigations.--The Secretary may perform
audits, examinations, and investigations of
pooled plan providers as may be necessary to
enforce and carry out the purposes of this
paragraph and paragraph (43).
(C) Guidance.--The Secretary shall issue such
guidance as the Secretary determines
appropriate to carry out this paragraph and
paragraph (43), including guidance--
(i) to identify the administrative
duties and other actions required to be
performed by a pooled plan provider
under either such paragraph; and
(ii) which requires in appropriate
cases that if an employer in the plan
fails to take the actions required
under subparagraph (A)(i)(II)--
(I) the assets of the plan
attributable to employees of
such employer (or beneficiaries
of such employees) are
transferred to a plan
maintained only by such
employer (or its successor), to
an eligible retirement plan as
defined in section 402(c)(8)(B)
of the Internal Revenue Code of
1986 for each individual whose
account is transferred, or to
any other arrangement that the
Secretary determines is
appropriate in such guidance;
and
(II) such employer (and not
the plan with respect to which
the failure occurred or any
other employer in such plan)
shall, except to the extent
provided in such guidance, be
liable for any liabilities with
respect to such plan
attributable to employees of
such employer (or beneficiaries
of such employees).
The Secretary shall take into account
under clause (ii) whether the failure
of an employer or pooled plan provider
to provide any disclosures or other
information, or to take any other
action, necessary to administer a plan
or to allow a plan to meet requirements
described in subparagraph (A)(i)(II)
has continued over a period of time
that demonstrates a lack of commitment
to compliance. The Secretary may waive
the requirements of subclause (ii)(I)
in appropriate circumstances if the
Secretary determines it is in the best
interests of the employees of the
employer referred to in such clause
(and the beneficiaries of such
employees) to retain the assets in the
plan with respect to which the
employer's failure occurred.
(D) Good faith compliance with law before
guidance.--An employer or pooled plan provider
shall not be treated as failing to meet a
requirement of guidance issued by the Secretary
under subparagraph (C) if, before the issuance
of such guidance, the employer or pooled plan
provider complies in good faith with a
reasonable interpretation of the provisions of
this paragraph, or paragraph (43), to which
such guidance relates.
(E) Aggregation rules.--For purposes of this
paragraph, in determining whether a person
meets the requirements of this paragraph to be
a pooled plan provider with respect to any
plan, all persons who perform services for the
plan and who are treated as a single employer
under subsection (b), (c), (m), or (o) of
section 414 of the Internal Revenue Code of
1986 shall be treated as one person.
(45) Pension-linked emergency savings account.--The
term ``pension-linked emergency savings account'' means
a short-term savings account established and maintained
as part of an individual account plan, in accordance
with section 801, on behalf of an eligible participant
(as such term is defined in section 801(b)) that--
(A) is a designated Roth account (within the
meaning of section 402A of the Internal Revenue
Code of 1986) and accepts only participant
contributions, as described in section
801(d)(1)(A), which are designated Roth
contributions subject to the rules of section
402A(e) of such Code; and
(B) meets the requirements of part 8 of
subtitle B.
* * * * * * *
Subtitle B--Regulatory Provisions
* * * * * * *
Part 7--Group Health Plan Requirements
* * * * * * *
Subpart C--General Provisions
* * * * * * *
SEC. 736. RULES APPLICABLE TO GROUP HEALTH PLANS ESTABLISHED AND
MAINTAINED BY A GROUP OR ASSOCIATION OF EMPLOYERS.
(a) Premium Rates for a Group or Association of Employers.--
(1)(A) In the case of a group health plan established
and maintained by a group or association of employers
described in section 3(5)(B), such plan may--
(i) establish base premium rates formed on an
actuarially sound, modified community rating
methodology that considers the pooling of all
plan participant claims; and
(ii) utilize the specific risk profile of
each employer member of such group or
association to determine contribution rates for
each such employer member's share of a premium
by actuarially adjusting above or below the
established base premium rates.
(B) For purposes of paragraph (1), the term
``employer member'' means--
(i) an employer who is a member of such group
or association of employers and employs at
least 1 common law employee; or
(ii) a group made up solely of self-employed
individuals, within which all of the self-
employed individual members of such group or
association are aggregated together as a single
employer member group, provided the group
includes at least 20 self-employed individual
members.
(2) In the event a group or association is made up
solely of self-employed individuals (and no employers
with at least 1 common law employee are members of such
group or association), the group health plan
established by such group or association shall--
(A) treat all self-employed individuals who
are members of such group or association as a
single risk pool;
(B) pool all plan participant claims; and
(C) charge each plan participant the same
premium rate.
(b) Discrimination and Pre-existing Condition Protections.--A
group health plan established and maintained by a group or
association of employers described in section 3(5)(B) shall be
prohibited from--
(1) establishing any rule for eligibility (including
continued eligibility) of any individual (including an
employee of an employer member or a self-employed
individual, or a dependent of such employee or self-
employed individual) to enroll for benefits under the
terms of the plan that discriminates based on any
health status-related factor that relates to such
individual (consistent with the rules under section
702(a)(1));
(2) requiring an individual (including an employee of
an employer member or a self-employed individual, or a
dependent of such employee or self-employed
individual), as a condition of enrollment or continued
enrollment under the plan, to pay a premium or
contribution that is greater than the premium or
contribution for a similarly situated individual
enrolled in the plan based on any health status-related
factor that relates to such individual (consistent with
the rules under section 702(b)(1)); and
(3) denying coverage under such plan on the basis of
a pre-existing condition (consistent with the rules
under section 2704 of the Public Health Service Act).
* * * * * * *
MINORITY VIEWS
Introduction
Committee Democrats oppose H.R. 2868, the Association
Health Plans Act. This misguided legislation would put
comprehensive and affordable coverage for small businesses and
workers at risk, create loopholes that undermine critical
consumer protections, and raise costs across the broader health
insurance market.
Before the Affordable Care Act (ACA),\1\ workers often had
limited options for obtaining affordable health coverage.\2\
People with preexisting conditions were particularly
disadvantaged, because they could be charged higher rates or
denied coverage altogether in the individual market. Small
businesses employing women or workers with chronic or high-cost
illnesses could be charged higher premiums, often making
coverage unaffordable. Those who could afford to buy coverage
in the individual and small group market often found their
insurance did not cover vital services, such as behavioral
health or maternity care.\3\
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\1\Pub. L. No. 111-148 (2010).
\2\Sara R. Collins et al., How the Affordable Care Act Has Improved
Americans' Ability to Buy Health Insurance on Their Own, Commonwealth
Fund (Feb. 1, 2017), https://www.commonwealthfund.org/publications/
issue-briefs/2017/feb/how-affordable-care-act-has-improved-americans-
ability-buy.
\3\Center on Budget and Policy Priorities, Essential Health
Benefits Under Threat, https://www.cbpp.org/essential-health-benefits-
under-threat (last visited June 8, 2023).
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The ACA took steps to level the playing field--establishing
safeguards for workers and employers alike. The ACA created
Marketplaces where individuals, self-employed people, and
families can access affordable health coverage, and the law has
also protected workers and businesses in the small group market
from unfair practices.\4\ Consumers have benefited from these
protections for over a decade despite dozens of attempts to
undermine this progress through Republican votes to repeal the
ACA in Congress\5\ and ideologically-driven litigation--most
recently through a lawsuit attacking coverage for lifesaving
preventive health services such as lung cancer screenings,
preexposure prophylaxis for HIV prevention, and medications to
lower the risk of breast cancer for high-risk women.\6\
---------------------------------------------------------------------------
\4\Nicole Rapfogel et al., 10 Ways the ACA Has Improved Health Care
in the Past Decade, Center for American Progress (Mar. 23, 2020),
https://www.americanprogress.org/article/10-ways-aca-improved-health-
care-past-decade/.
\5\Chris Riotta, GOP Aims To Kill Bazaar Yet Again After Failing 70
Times, Newsweek (July 29, 2017), http://www/gop-health-care-bill-
repeal-and-replace-70-failed-attempts-643832.
\6\Laurie Sob el et al., Explaining Litigation Challenging the
ACA's Preventive Services Requirements: Braid wood Management Inc. v.
Becker, Kaiser Family Foundation (May 15, 2023), http://www/omens-
health-policy/issue-brief/explaining-litigation-challenging-the-acas-
preventive-services-requirements-braidwood-management/.
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In addition to instituting crucial consumer protections,
the ACA has led to historic improvements in the number of
people with health coverage. In 2022, the uninsured rate fell
to 8 percent--the lowest level in history.\7\ During the 117th
Congress, Democrats took bold action to build upon this
progress and further improve affordability. The American Rescue
Plan Act (ARPA)\8\ and the Inflation Reduction Act (IRA)\9\
strengthened the advance premium tax credits and eliminated the
subsidy ``cliff'' for individuals earning over 400 percent of
the Federal Poverty Level through 2025. Thanks to these
reforms, during the most recent Open Enrollment Period, a
record 16.3 million people signed up for coverage through
Healthcare and State-Based Marketplaces, and the average
consumer saved $800 per year in premiums.\10\
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\7\Aiden Lee et al., National Uninsured Rate Reaches All-Time Low
in Early 2022, Assistant Secretary for Planning and Evaluation, U.S.
Dept. of Health and Human Services (Aug. 2022), http://ape/sites/
default/files/documents/15c1f9899b3f203887deba90e3005f5a/Uninsured-Q1-
2022-Data-Point-HP 2022 23 08.pdf.
\8\Pub. L. No. 117-2 (2021).
\9\Pub. L. No. 117-169 (2022).
\10\Centers for Medicare & Medicaid Services, Biden-Harris
Administration Announces Record-Breaking 16.3 Million People Signed Up
for Health Care Coverage in ACA Marketplaces During 2022-2023 Open
Enrollment Season (Jan. 25, 2023), http://www/about/news/2023/01/25/
maidenhair-breaking-16-3-million-people-signed-up-health-care-coverage-
aca-marketplaces-during-2022 2023-open-enrollment-season.html.
---------------------------------------------------------------------------
While health care costs for many workers and businesses
remain a challenge, association health plans (Apes) are not the
answer. Apes are arrangements sponsored by small employer
groups or individuals to provide health insurance to their
members outside the traditional small group and individual
market. Expanding these arrangements, as proposed under H.R.
2868, threatens to harm workers and small businesses by making
coverage more expensive for many and entirely out of reach for
some. In the April 26, 2023, hearing held by the Subcommittee
on Health, Employment, Labor, and Pensions titled Reducing
Health Care Costs for Working Americans and Their Families,
Sabrina Corvette, Research Professor and Co-Director of the
Center on Health Insurance Reforms at Georgetown University's
McCourt School of Public Policy, warned of the consequences of
AHPs, stating that ``AHPs just create new winners and losers,
with the losers being those who are older and sicker.''\11\
This is why more than 30 leading consumer and patient groups
have expressed serious concerns with H.R. 2868\12\ and why
Committee Democrats unanimously reject this harmful
legislation.
---------------------------------------------------------------------------
\11\Reducing Health Care Costs for Working Americans and Their
Families: Hearing Before the Subcomm. on Health, Empl., Lab., and
Pensions of the H. Comm. On Educ. & the Workforce, 118th Cong. 10
(2023) (testimony of Sabrina Corlette, Research Professor and Co-
Director, Center on Health Insurance Reforms at the Georgetown
University McCourt School of Public Policy).
\12\Patient community concerns about the detrimental impact of
policies included in HR 2868, the Association Health Plans Act; HR 824,
the Telehealth Benefit Expansion for Workers Act; and HR 2813, the
Self-Insurance Protection Act, Letter to Chair Virginia Foxx and
Ranking Member Bobby Scott, H. Comm. on Educ. & the Workforce, Full
Committee Markup (June 6, 2023) (on file with author).
---------------------------------------------------------------------------
H.R. 2868 Recycles Failed Republican Policies
Under current law, coverage offered through a group or
association to individuals or small employers must generally
comply with the patient protections of the ACA and state
insurance law.\13\ However, Republicans have long sought
legislative and regulatory changes that eliminate guardrails
that protect consumers, portraying such proposals as extending
affordable health insurance options to small businesses. By
radically expanding the circumstances in which AHPs can provide
coverage to small employers and individuals without complying
with critical safeguards, H.R. 2868 recycles this harmful idea.
---------------------------------------------------------------------------
\13\29 U.S.C. Sec. 1144(b)(6); Centers for Medicare and Medicaid
Services, Application of Individual and Group Market Requirements under
Title XXVII of the Public Health Service Act when Insurance Coverage Is
Sold to, or through, Associations (Sept. 1, 2011), https://www.cms.gov/
CCIIO/Resources/Files/Downloads/association_9coverage_9_1_2011.pdf.
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Expansion of AHPs has been central to the Republican health
care agenda for decades, most recently in Republican attempts
to repeal the ACA.\14\ In 2017, the Committee marked up H.R.
1101, the Small Business Health Fairness Act, which would have
expanded AHPs in a manner that would undermine important
consumer protections. At the time, Committee Republicans
described this legislation as a key component of their plan for
``repealing and replacing Obamacare in the 115th
Congress.''\15\ These partisan repeal efforts were rejected in
the Senate and the ACA remains the law of the land.
---------------------------------------------------------------------------
\14\See, e.g., H.R. 1136, Affordable Health Care Act of 1999 (106th
Congress); H.R. 1101, Small Business Health Fairness Act of 2017 (115th
Congress).
\15\H. Rep. 115-43 at 24 (2017).
---------------------------------------------------------------------------
Since Republicans failed to enact their AHP proposals
legislatively, in 2018, the Trump Administration attempted to
do so through executive action by proposing and finalizing a
rule\16\ to expand AHPs under the Employee Retirement Income
Security Act of 1974 (ERISA).\17\ This rule would have
dramatically expanded the circumstances under which AHPs could
be offered as single-employer group health plans--even to self-
employed individuals without any common law employees. However,
on March 28, 2019, in State of New York v. United States
Department of Labor, Judge John D. Bates, an appointee of
President George W. Bush, struck down the core provisions of
the final rule, describing it as ``an end-run around the
ACA''\18\ that ``does violence to ERISA.''\19\ Accordingly, the
court vacated and remanded the remaining provisions of the
final rule to the Department of Labor for reconsideration.\20\
---------------------------------------------------------------------------
\16\U.S. Dep't of Lab., Final Rule: Definition of ``Employer''
Under Section 3(5) of ERISA Association Health Plans, 83 Fed. Reg.
28912 (June 21, 2018), https://www.federalregister.gov/documents/2018/
06/21/2018-12992/definition-of-employer-under-section-35-of-erisa-
association-health
-plans.
\17\Pub. L. No. 93-406 (1974).
\18\New York v. United States Dep't of Lab., 363 F. Supp. 3d 109,
117 (D.D.C. 2019).
\19\Id.
\20\Id. at 141. Note that the ruling was appealed to the United
States Court of Appeals for the District of Columbia Circuit but has
been on hold since February 8, 2021, while ``[t]he matter remains under
consideration by the Department.'' Status Report at 1, New York v.
United States Dep't of Lab., Case No. 19-5125 (D.C. Cir. Aug. 2022).
Democrats have since encouraged the Department to act to protect
consumers from harm. On Feb. 13, 2023, Ranking Member Scott and HELP
Subcommittee Ranking Member DeSaulnier wrote to the Assistant Secretary
for the Employee Benefits Security Administration to express support
for the agency's proposed rulemaking to rescind the Trump
Administration's AHP final rule. See Letter from Ranking Member Bobby
Scott and Ranking Member Mark DeSaulnier to the Assistant Secretary of
Labor Lisa M. Gomez (Feb. 13, 2023), https://democrats-
edworkforce.house.gov/imo/media/doc/rm_ scott_letter_ to_ebsa_ on_
trump-era_association_ health_ plan_rule.pdf.
---------------------------------------------------------------------------
Having failed time and again in their efforts to expand
AHPs, Committee Republicans have now put forward H.R. 2868 in
yet another attempt to achieve this goal. Under this
legislation, ERISA's standards would be eroded such that sole
proprietors with no common law employees would be considered
``employers,'' and AHP arrangements would be able to evade many
of the consumer protections that would otherwise apply to the
individual or small group market. In addition, the bill would
treat AHPs as ERISA-covered group health plans exempt from
state law, thereby circumventing the authority of state
insurance regulators.
H.R. 2868 Creates Market Fragmentation and Raises Health Care Costs
Under the ACA, health insurance sold through an association
to individuals and small employers generally must meet the same
standards that apply to coverage sold in the individual and
small group market.\21\ However, by allowing small employers
and individuals to instead be subject to requirements
applicable to large employers, H.R. 2868 unravels these
protections and allows association health plans to operate
under different rules.
---------------------------------------------------------------------------
\21\Centers for Medicare & Medicaid Services, supra note 13 (2011).
---------------------------------------------------------------------------
Experts have consistently warned that this approach--which
is antithetical to the foundational principles of the ACA that
ensure no one gets left behind--would fragment the health
insurance market. According to the American Academy of
Actuaries, allowing AHPs to operate under different rules could
result in adverse selection that raises costs throughout the
insurance pool and creates a market in which higher-cost
groups--namely, those that are generally sicker or older--
``could find it more difficult to obtain coverage.''\22\
Similarly, in its assessment of the Trump Administration's
final rule on AHPs, the Congressional Budget Office determined
that ``the primary factor driving lower premiums for AHPs is
the ability to price premiums on the basis of each
association's expected health care spending and thereby attract
employers with relatively low-risk employees and avoid those
with higher-risk employees.''\23\
---------------------------------------------------------------------------
\22\American Academy of Actuaries, Issue Brief: Association Health
Plans (Feb. 2017), http://www.actuary.org/content/association- health-
plans-0.
\23\Cong. Budget Office, How CBO and JCT Analyzed Coverage Effects
of New Rules for Association Health Plans and Short-Term Plans 5 (Jan.
2019), https://www.cbo.gov/system/files/2019 01/54915-New_Rules_
for_AHPs_STPs.pdf.
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H.R. 2868 Threatens Comprehensive, Affordable Coverage
Under H.R. 2868, AHPs could evade state and federal benefit
standards and consumer protections, threatening the quality of
coverage provided to their own enrollees. As a result,
enrollees run the risk of--potentially unknowingly--losing out
on comprehensive care that would otherwise be guaranteed under
the ACA and state law. While the bill applies some superficial
consumer protections to AHPs (e.g., nominal protections against
discrimination based on preexisting conditions), it creates
other large loopholes that leave consumers vulnerable.
Disturbingly, this legislation explicitly authorizes AHPs
to set premiums based on the ``specific risk profile'' of
employer members, enabling AHPs to charge higher premiums to
groups based on their age, gender, or other factors. Moreover,
even if premiums are not set directly on health-related factors
by an association, under this bill, premiums could take into
account numerous other factors that raise costs for people who
are older or have preexisting conditions.\24\ As a result, this
bill would all but invite AHPs to charge workers with more
expensive health needs far higher premiums--if those workers
could even afford to participate in the associations at all.
---------------------------------------------------------------------------
\24\See Sarah Lueck, Association Health Plan Expansion Likely to
Hurt Consumers, State Insurance Markets, Cen. on Budg. & Poli.
Priorities (Mar. 7, 2019), https://www.cbpp.org/research/health/
association-health-plan-expansion-likely-to-hurt-consumers-state-
insurance-markets.
---------------------------------------------------------------------------
Allowing insurers and health plans to avoid covering needed
benefits is a longstanding tenet of Republicans' approach to
health care.\25\ H.R. 2868 is no different. Despite coverage of
essential health benefits being both popular and necessary,\26\
under the legislation, AHPs would be exempt from this
foundational protection of the ACA. As a result, AHPs could
exclude certain categories of coverage, such as maternity care,
mental health, or substance use disorder, to dissuade certain
groups or individuals from enrolling. Reducing benefit levels
or avoiding the costs of providing comprehensive benefits can
reduce costs in the short-term but will ultimately negatively
impact consumers and people who need coverage the most.
Individuals enrolled in AHPs could be shocked to find they do
not have access to the care they need or the financial security
they expected.
---------------------------------------------------------------------------
\25\See e.g., Lydia Mitts et al., House Republicans Gut Protections
for Pre-Existing Conditions in Latest Proposal, Families USA (Mar. 26,
2017), https://familiesusa.org/ resources/house-republicans-gut-
protections-for-pre-existing-conditions-in- latest-proposal/.
\26\Dania Palanker, Eliminating Essential Health Benefits Will
Shift Financial Risk Back to Consumers, The Commonwealth Fund (Mar. 24,
2017), https://www.commonwealthfund.org/
blog/2017/eliminating-essential-health-benefits-will-shift-financial-
risk-back-consumers.
---------------------------------------------------------------------------
H.R. 2868 Gambles With the Financial Security of Workers, Employers,
and Providers
H.R. 2868 allows AHPs to evade state regulations that
prevent fraud and mismanagement. This is profoundly dangerous
for consumers and employers who participate in these
arrangements, as well as the doctors, health centers, and
hospitals who may not receive reimbursement for the medical
care they provide. Ms. Corlette explained the high stakes at
the HELP Subcommittee hearing:
[I]f history is any guide, many AHPs may seem strong
at first because they are able to attract healthy
groups and can offer low rates and generous benefits to
those groups. Over time, however, as workers get older
and sicker, the risk in the pool deteriorates. AHPs
then either must raise rates, reduce benefits, disband,
or, in the worst cases, become insolvent.\27\
---------------------------------------------------------------------------
\27\Corlette, supra note 11 at 10.
The history of multiple employer welfare arrangements
(MEWAs) offers a sobering warning for the financial risks posed
by the proliferation of AHPs. H.R. 2868 allows AHPs to form
under limited regulation and oversight, hearkening back to the
time when MEWAs also enjoyed limited regulation and gambled
with the financial security of both workers and employers.\28\
In 2001, Sunkist Growers, Inc., a California-based MEWA that
covered 23,000 people, became insolvent, leaving behind
approximately $11 million in unpaid claims.\29\ Similarly, New
Jersey's Coalition of Automotive Retailers became insolvent in
2002, leaving 20,000 individuals without coverage and $15
million in unpaid claims.\30\
---------------------------------------------------------------------------
\28\ U.S. Dept. of Lab., MEWAs Multiple Employer Welfare
Arrangements under the Employee Retirement Income Security Act (ERISA):
A Guide to Federal and State Regulation at 3 (``Recognizing that it was
both appropriate and necessary for States to be able to establish,
apply and enforce State insurance laws with respect to MEWAs, the U.S.
Congress amended ERISA in 1983, as part of Public Law 97-473, to
provide an exception to ERISA's broad preemption provisions for the
regulation of MEWAs under State insurance laws.'').
\29\ Mila Kofman, et al., MEWAs: The Threat of Plan Insolvency and
Other Challenges, Commonwealth Fund (Mar. 2004), https://
www.commonwealthfund.org/sites/default/files /documents/
_media_files_publications_issue_brief_2004_mar_mewas_the_threat_of_plan_
insolvency_and_
other_challenges_kofman_mewas_pdf.pdf.
\30\Id.
---------------------------------------------------------------------------
Unfortunately, MEWAs continue to face financial challenges
and heightened risk of fraud to this day. The Department of
Labor routinely documents investigations and enforcement
actions against MEWAs that have committed violations of ERISA
and failed to pay promised benefits.\31\ Just last month, it
was announced that health plan participants, employers, and
medical providers harmed by a MEWA operating in 36 states would
begin to finally receive payments related to more than $54
million in unpaid health claims.\32\ Unfortunately, despite
these enforcement efforts, victims are often not made whole,
leaving workers, employers, and health care providers to absorb
financial losses caused by fraudulent and mismanaged MEWAs.\33\
By expanding AHPs and undermining states' ability to regulate
these arrangements, H.R. 2868 would dramatically worsen this
already serious problem.
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\31\Christine Monahan, Updates from the MEWA Files: The Good, the
Bad, and the Ugly of Federal Enforcement Efforts, CHIRblog (Dec. 19,
2019), https://chirblog.org/mewa-files-part-3-good-bad-ugly/.
\32\Press Release, U.S. Dep't of Labor, Federal Court Approves Plan
To Distribute Assets to Participants Harmed by Underfunded Group Health
Plan Arrangement Operating in 36 States (May 1, 2023), https://
www.dol.gov/newsroom/releases/ ebsa/ebsa20230501.
\33\Monahan, supra note 29.
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Democratic Amendments Offered During Markup of H.R. 2868
Committee Democrats put forward four amendments to improve
the bill. These amendments would have ensured that AHPs would
have to cover benefits provided by plans in the ACA-compliant
small group and individual market and would have protected
consumers from other potential harms that could result from
enactment of this legislation.
Committee Republicans rejected all four of the Democratic
amendments that were considered.
------------------------------------------------------------------------
Amendment Offered By Description Action Taken
------------------------------------------------------------------------
#2.......... Ms. Jayapal........ To require Defeated
association
health plans to
cover maternity
and newborn care.
#3.......... Mr. Scott.......... To provide that Defeated
the bill will not
take effect if it
will raise
premiums for
people with
preexisting
conditions.
#4.......... Mr. Norcross....... To require Defeated
association
health plans to
cover mental
health and
substance use
disorder.
#5.......... Mrs. Hayes......... To provide that Defeated
the bill will not
take effect if it
will raise
premiums for
older workers.
------------------------------------------------------------------------
Conclusion
H.R. 2868, the Association Health Plans Act, would erode
the protections in the ACA and leave small businesses and their
workers vulnerable to unaffordable health coverage and fewer
benefits. The expansion of AHPs will threaten affordable
coverage for those outside of the associations while failing to
provide comprehensive, reliable coverage to their own
enrollees. This misguided legislation is simply a recycled
attack on affordable health care and yet another effort to roll
back the historic progress made under the ACA.
For the reasons stated above, Committee Democrats
unanimously opposed H.R. 2868 when the Committee on Education
and the Workforce considered it on June 6, 2023. We urge the
House of Representatives to do the same.
Robert C. ``Bobby'' Scott,
Ranking Member.
Joe Courtney.
Mark Takano.
Mark DeSaulnier.
Pramila Jayapal.
Lucy McBath.
Raul M. Grijalva.
Gregorio Kilili Camacho Sablan.
Suzanne Bonamici.
Alma S. Adams.
Susan Wild.
Jahana Hayes.
Teresa Leger Fernandez.
Frank J. Mrvan.
Haley M. Stevens.
Jamaal Bowman.