This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0897.HRS
DATE: 3/21/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 897 Group Health Plans
SPONSOR(S): Fernandez-Barquin
TIED BILLS: IDEN./SIM. BILLS: SB 940
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Healthcare Regulation Subcommittee Poche McElroy
2) Insurance & Banking Subcommittee
3) Health & Human Services Committee
SUMMARY ANALYSIS
An association health plan (AHP) is a group purchasing arrangement in which members of a trade group or
professional association jointly obtain health insurance for employees. These arrangements differ from
traditional group insurance by their unique structure, since they involve the purchase of insurance products
across multiple employers.
On June 21, 2018, the Employee Benefits Security Administration within the federal Department of Labor
(DOL) issued a final rule amending the parameters for association health plans (AHPs), consistent with the
directives of a 2017 Presidential Executive Order. The revised regulations were intended to give an employer
greater flexibility to participate in an AHP. The new federal rule, among other things, permitted establishing an
AHP for the explicit purpose of providing health coverage, so long as the association has another legitimate
purpose for members and allowed the self-employed and sole proprietors to participate in an AHP. Overall,
the federal rule was designed to offer an expanded pathway for the establishment of an AHP.
In July 2018, eleven states and the District of Columbia sued the DOL, alleging the final rule, and particularly
the rule’s provisions on bona fide association and working owner provisions, conflicted with the text and
purpose of Employee Retirement Income Security Act (ERISA) and Patient Portability and Affordable Care Act
(PPACA), and exceeded DOL’s statutory authority. On March 28, 2019, the U.S. District Court for the District of
Columbia agreed with the states, finding that the DOL unreasonably expanded ERISA’s definition of
“employers” as an end run around the requirements of PPACA. The court struck down the portions of the
DOL’s AHP rule that expanded the ability of small businesses and owners to buy health insurance on the large
group market that was not subject to PPACA requirements that apply to the small group market.
Current Florida law incorporates the now stricken federal rule by reference, applicable to MEWAs.
HB 897 removes the reference in the MEWA statute to the federal rule regarding AHPs that was struck down
by a federal district court in 2019, and incorporates the requirements from the stricken rule to be considered a
bona fide group for purposes of establishing a MEWA. Incorporating the requirements to be considered a bona
fide group from the stricken rule maintains an expanded pathway for more groups or associations to form
MEWAs.
The bill has no fiscal impact on state or local government.
The bill provides an effective date of July 1, 2023. STORAGE NAME: h0897.HRS PAGE: 2
DATE: 3/21/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Association Health Plans (AHPs)
An association health plan (AHP) is a group purchasing arrangement in which members of a trade
group or professional association jointly obtain health insurance for employees. These arrangements
differ from traditional group insurance by their unique structure, since they involve the purchase of
insurance products across multiple employers.
Federal Regulation of AHPs
Employment Retirement Income Security Act (ERISA)
Congress effectively federalized the regulation of health benefits provided by large employers with the
passage of the Employment Retirement Income Security Act of 1974.
1
The law sets parameters on
private-sector employee health benefit plans and protects the interests of individuals who enroll in such
plans. However, states retain the authority to regulate a substantial share of employer-provided health
care benefit plans. ERISA does not prevent a state from regulating the activities of health insurers, and
can be described as follows:
ERISA does not preempt state insurance law. The result is a dual regulatory framework. To the
extent that an ERISA plan pays directly out of plan assets (a “self-funded plan”), it is exempt
from state regulation. To the extent that the plan purchases insurance to cover some or all of its
benefit obligations (an “insured plan”), the state’s regulatory authority over the insurance
contract results in indirect state regulation of aspects of the plan.
2
Under ERISA, AHPs are one form of a class of employee benefit plans known as “multiple-employer
welfare arrangements” (MEWAs). ERISA defines MEWAs as employee health benefit plans that are
established to provide benefits to the employees of two or more employers.
3
Upon meeting certain
conditions, these benefit arrangements can be treated as a single employer for regulatory purposes. In
order for a MEWA to constitute an “employer” under ERISA, there must be a bona fide group or
association of employers joined together to provide benefits for their employees.
4
ERISA dictates that a
bona fide group or association must consist of employers who share a “commonality of interests” with
respect to employment relationships, meaning that the employers must be engaged in a similar trade or
business activity that links their interests.
5
Section 514(b)(6) of ERISA provides a special exception for the application of state insurance laws to
MEWAs – meaning that such plans are subject to both federal and state regulation.
6
1
29 U.S.C. 1001 et seq.
2
National Association of Insurance Commissioners, “Health and Welfare Plans Under the Employee Retirement Income Security Act:
Guidelines for State and Federal Regulation, 2004. Available at https://www.naic.org/documents/prod_serv_legal_ers_om.pdf (last
viewed on March 15, 2023).
3
29 U.S.C. 1002(40).
4
U.S. Department of Labor, Employee Benefits Security Administration, “Multiple Employer Welfare Arrangements under the Employee
Retirement Income Security Act (ERISA): A Guide to Federal and State Regulation”, August 2013. Available at
https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/mewa-under-erisa-a-guide-to-federal-
and-state-regulation.pdf (last viewed on March 15, 2023).
5
The “commonality of interest” test is derived from ERISA section 3(5), 29 U.S.C. 1002(5). Various advisory opinions from the U.S.
Department of Labor have used this rationale to determine whether an employer group is bona fide under ERISA. See, for example,
DOL Advisory Opinion 2017-02AC, available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/advisory-
opinions/2017-02ac (last viewed on March 15, 2023).
6
29 U.S.C. 1144(b)(6)(A). STORAGE NAME: h0897.HRS PAGE: 3
DATE: 3/21/2023
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act (PPACA)
7
imposed extensive requirements on health
insurers and health insurance policies relating to required benefits, rating and underwriting standards,
required review of rate increases, and other requirements.
8
Among its sweeping changes to the U.S.
health care system are requirements for health insurers to make coverage available to all individuals
and employers, without exclusions for preexisting conditions and without basing premiums on any
health-related factors.
9
Many of the changes in the PPACA apply to individual and small group markets, except those plans
that have grandfathered status under the law.
10
For example, the PPACA requires coverage offered in
the individual and small group markets to provide certain categories of services, called essential health
benefits.
11
Also, the PPACA requires that premiums for individual and small group policies may vary only by:
12
Age, up to a maximum ratio of 3 to 1. This means that the rates for older adults cannot be more
than three times greater than the rates for younger adults.
Tobacco, up to a maximum ratio of 1.5 to 1.
Geographic rating area.
Whether coverage is for an individual or a family.
The PPACA prohibits an insurer from establishing rules for eligibility based on any of the following
health status-related factors: health status, medical condition, claims experience, receipt of health care,
medical history, genetic information, disability, evidence of insurability (including conditions arising out
of domestic violence), or any other health-status related factor deemed appropriate by the U.S.
Department of Health and Human Services.
13
Additionally, the PPACA established minimum medical loss ratio (MLR) requirements for group and
individual health insurance plans.
14
MLR refers to the percentage of insurance premium payments that
are actually spent on medical claims by an insurer. In general, MLR requirements are intended to
increase price transparency for consumers while promoting efficiency among insurers.
15
Under the
PPACA, large group plans must dedicate at least 85 percent of premium payments to medical claims,
while small group and individual market plans must dedicate at least 80 percent of premium payments
to medical claims.
16
AHPs are subject to a “look through” provision that dictates how a participating employer is categorized
for PPACA compliance purposes. Guidance released by the Centers for Medicare and Medicaid
Services (CMS) in 2011 describes the “look through” concept as follows:
CMS believes that, in most situations involving employment-based association coverage, the
group health plan exists at the individual employer level and not at the association-of-employers
7
Patient Protection and Affordable Care Act (PPACA), Pub. L. No. 111-148.
8
Most of the insurance regulatory provisions in PPACA amend Title XXVII of the Public Health Service Act (PHSA), 42 U.S.C. 300gg et
seq.
9
Under PPACA, the prohibition on preexisting condition exclusion refers to the fact that health insurance companies cannot refuse
coverage or charge higher premiums to those who have a “pre-existing condition” — that is, a health problem that existed before the
date that health coverage starts. Prior to passage of the PPACA, employers and insurers could exclude coverage for pre-existing
conditions for a period of time if an individual had not maintained continuous insurance coverage, unless prohibited by state law.
10
For an insured plan, grandfathered health plan coverage is group or individual coverage in which an individual was enrolled on March
23, 2010, subject to conditions for maintaining grandfathered status as specified by law and rule. See PPACA s. 1251; 42 U.S.C. s.
18011.
11
PPACA s. 1302; 42 U.S.C. 300gg-6.
12
PPACA s. 1201; 42 U.S.C. 300gg.
13
PPACA s. 1201; 42 U.S.C. s. 300gg-4.
14
PPACA s. 1001; 42 U.S.C. 300gg-18.
15
“Explaining Health Care Reform: Medical Loss Ratio (MLR)”, Henry J Kaiser Family Foundation, February 29, 2012. Available at
https://www.kff.org/health-reform/fact-sheet/explaining-health-care-reform-medical-loss-ratio-mlr/ (last viewed on March 15, 2023).
16
Supra, FN 14. STORAGE NAME: h0897.HRS PAGE: 4
DATE: 3/21/2023
level. In these situations, the size of each individual employer participating in the association
determines whether that employer’s coverage is subject to the small group market or the large
group market rules.
17
This means that each employer participating in an AHP is considered to have established a separate
group health plan for its own employer and each employer is independently subject to PPACA’s
coverage requirements – unless the AHP is determined to be a bona fide association under ERISA.
Since many PPACA coverage requirements are only applicable to the individual and small group
markets, the self-employed and small employers cannot use AHPs as a vehicle to gain flexibility without
meeting the ERISA definition of “employer”.
18
Revised Federal Rule on AHP Participation
On June 21, 2018, the Employee Benefits Security Administration within the federal Department of
Labor (DOL) issued a final rule amending the parameters for AHPs,
19
consistent with the directives of a
2017 Presidential Executive Order.
20
The revised regulations are intended to give an employer greater
flexibility to participate in an AHP. The new federal rule:
Revises the commonality of interest requirement by allowing AHPs to be established based on
either industry or geography;
Permits an AHP to be established for the explicit purpose of providing health insurance, so long
as the association has another legitimate purpose for members;
Allows for participation in an AHP by the self-employed and sole proprietors; and,
Eliminates the “look-through” approach previously adopted by CMS for the categorization of
employer-sponsored health benefits.
21
This new federal rule is designed to offer an expanded pathway for the establishment of an AHP.
Employers who do not operate in the same trade or industry now have the option to initiate an AHP, so
long as the association is limited to members within a single state or metropolitan area. Moreover, the
rule opens the door to participation by self-employed individuals, who were not previously eligible to
participate because they had not been considered “employers” as that term is defined under ERISA.
22
The new rule also diverges from previous ERISA interpretation by allowing AHPs to form for the
primary purpose of providing health insurance benefits to employees of participating employers. The
Department of Labor had previously held that the provision of health benefits could not be the principal
purpose underlying establishment of an AHP. The new rule eases this standard by indicating that an
AHP must only satisfy some legitimate purpose for member employers, above-and-beyond the
provision of health benefits.
23
Lastly, the 2018 federal guidance affirms the ability of states to regulate AHPs, so long as existing
ERISA law does not preclude them from doing so.
24
Federal Court Strikes Down Revised Federal Rule on AHP Participation
17
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,” Insurance Standards Bulletin Series—
INFORMATION. September 1, 2011. Available at
https://www.cms.gov/CCIIO/Resources/Files/Downloads/association_coverage_9_1_2011.pdf (last viewed on March 15, 2023).
18
Alden J. Bianchi, “Association Health Plan Perspectives (Part 2): The Look-Through Rule and the Limits of State Regulatory Power”,
The National Law Review. October 3, 2018. Available at https://www.natlawreview.com/article/association-health-plan-perspectives-
part-2-look-through-rule-and-limits-state (last viewed on March 15, 2023).
19
Definition of “Employer” Under Section 3(5) of ERISA-Association Health Plans, 83 FR 28912. June 21, 2018.
20
Promoting Healthcare Choice and Competition Across the United States, 82 FR 48385. October 21, 2017.
21
Milliman, Inc. “Association health plans after the final rule”, August 22, 2018. Available at
http://www.milliman.com/insight/2018/Association-health-plans-after-the-final-rule/ (last viewed on March 15, 2023).
22
Supra, FN 19.
23
Avalere Health, “Association Health Plans: Projecting the Impact of the Proposed Rule”, prepared for America’s Health Insurance
Plans (AHIP). February 28, 2018. Available at http://go.avalere.com/acton/attachment/12909/f-052f/1/-/-/-/-
/Association%20Health%20Plans%20White%20Paper.pdf (last viewed on March 15, 2023).
24
Supra, FN 18. STORAGE NAME: h0897.HRS PAGE: 5
DATE: 3/21/2023
In July 2018, eleven states
25
and the District of Columbia sued the DOL, alleging the final rule, and
particularly the rule’s provisions on bona fide association and working owner provisions, conflicted with
the text and purpose of ERISA and PPACA, and exceeded DOL’s statutory authority. On March 28,
2019, the U.S. District Court for the District of Columbia agreed with the states, finding that the DOL
unreasonably expanded ERISA’s definition of “employers” as an end run around the requirements of
PPACA.
26
The court struck down the portions of the DOL’s AHP rule that expanded the ability of small
businesses and owners to buy health insurance on the large group market that was not subject to
PPACA requirements that apply to the small group market, such as the requirements related to EHB
coverage and limitations on premium rates. The court reasoned that the DOL rule went beyond
ERISA’s focus on employer benefit plans to instead cover commercial insurance transactions between
unrelated parties. Indeed, the court stated that DOL had so greatly expanded the “purpose” criteria in
the final rule that “virtually no association could fail to meet it.
Further, the court concluded that the DOL rule provided no meaningful limit on what associations
needed to demonstrate to qualify as “employers” under ERISA, failed to show why geographic
proximity was connected to common employer interest essential for coverage under ERISA, did not
require members of associations to be sufficiently aligned in purpose, and allowed owners without any
employees to “absurdly” count themselves as both employer and employee to suggest an
employment relationship justifying coverage under ERISA.
State Regulation of AHPs
The regulatory oversight of health insurance is generally reserved to the states, except when explicitly
preempted by federal law. In Florida, the Office of Insurance Regulation (OIR) is responsible for all
activities concerning insurers and other risk bearing entities, including licensing, rates, policy forms,
market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, premium
financing, and administrative supervision, as provided under the insurance code.
27
All health insurance policies issued in Florida, with the exception of certain self-insured policies,
28
must
meet certain requirements that are detailed throughout the Florida Insurance Code. Chapter 627, F.S.,
sets parameters and requirements for health insurance policies and ch. 641, F.S., provides
requirements for health plans issued by HMOs. At a minimum, insurance policies must specify premium
rates, services covered, and effective dates. Insurers must document the time when a policy takes
effect and the period during which the policy remains in effect.
29
Florida Nonprofit Multiple-Employer Welfare Arrangement Act
The Florida Nonprofit Multiple-Employer Welfare Arrangement Act (MEWA Act) was enacted in 1983 to
regulate self-funded MEWAs operating in the state.
30
Under this law, a MEWA is an employee welfare
benefit plan maintained for the purpose of offering health insurance benefits to employees of two or
more employers, or to their beneficiaries.
31
This definition is consistent with the federal standard
included in ERISA. Among other requirements, a MEWA must have a certificate of authority issued by
OIR, must be operated in accordance with sound actuarial principles, must maintain appropriate loss
reserves, and must maintain a fund balance equal to 10 percent of its total liabilities.
32
Current law
25
California, Delaware, Kentucky, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Virginia, and Washington.
26
State of New York, et al. v. U.S. Department of Labor, et al., No. 1:18-cv-01747 (D.D.C. Mar. 28, 2019).
27
S. 20.121(3)(a)1., F.S. The OIR’s commissioner is the agency head for purposes of final agency action, and its rulemaking body is
the Financial Services Commission (the Governor and the Cabinet).
28
29 U.S.C. 18 § 1001 et seq. ERISA regulates certain self-insured plans, which represent approximately 50 percent of the insureds in
Florida. These plans cannot be regulated by state law.
29
S. 627.413(1)(d), F.S.
30
Ss. 624.436–624.446, F.S.
31
S. 624.437(1), F.S.
32
Ss. 624.426–624.446, F.S. STORAGE NAME: h0897.HRS PAGE: 6
DATE: 3/21/2023
provides an exception to the MEWA regulatory laws for a MEWA which is fully insured by an authorized
insurer or an arrangement exempt under the provisions of ERISA.
33
There are currently three self-funded MEWAs operating in the state, accounting for more than 21,000
covered lives.
34
The participation parameters currently in the MEWA Act limit the ability of
unrelated employers to form MEWAs. MEWAs may only be established among employers who share a
common trade or profession,
35
in keeping with federal ERISA standards. At present, statutes
prevent employers from exercising the additional flexibility provided to them under the revised federal
rule on AHPs. If the statutes are amended to mimic the federal rule, additional employers may seek to
form MEWAs in an effort to obtain more affordable employee health benefits.
In 2019, the legislature adopted the federal rule by reference into Florida law, which allowed for
expanded availability of association and short-term health insurance policies, as permitted under
the revised federal regulations.
36
Specifically, the law allows employers of disparate trades or
industries to establish an association health plan. Under previous law, only employers who shared a
common trade or business interest were eligible to set up such a plan. The law also allows an
association to be established for the primary purpose of providing health care coverage and
benefits to employees of member employers to the association.
Effect of Proposed Changes
HB 897 removes the reference in the MEWA statute to the federal rule regarding AHPs that was struck
down by a federal district court in 2019, and incorporates the requirements from the stricken rule to be
considered a bona fide group for purposes of establishing a MEWA under state insurance regulations.
Incorporating the requirements to be considered a bona fide group from the stricken rule maintains an
expanded pathway for more groups or associations to form MEWAs.
The bill specifies the following criteria for a bona fide group or association of employers for purposes of
establishing a MEWA:
The entity must have at least one substantial business purpose among its member employers
that is unrelated to health plan coverage or other employee benefits.
o A substantial business purpose exists if the entity would be a viable business without
sponsoring an employee benefit plan. The business purpose can include promoting
common business interests or the common economic interests, and but need not be a
for-profit activity.
Each member employer is a person acting directly as an employer of at least one employee
who participates under the plan.
The entity has a formal organizational structure with a governing body.
The entity’s functions and activities are controlled by its member employers, which also control
the health plan in form and substance.
The member employers have a principal place of business in the same region, not exceeding
the boundaries of a single state or a metropolitan area, even if the metropolitan area includes
more than one state.
The entity makes coverage under the health plan available only to a:
o Participating employer.
o Current participating employer’s employee.
o Former employee of a current participating employer who became eligible for coverage
under the plan while still employed.
o Current or former employer’s spouse, dependent child, or any other beneficiary.
The entity and the health plan coverage offered comply with nondiscrimination provisions of s.
627.6699.
33
S. 624.437(3), F.S.
34
They are Florida Bankers Health Consortium, Inc., Greater Health Trust, and Independent Colleges and Universities Benefits
Association, Inc.; Office of Insurance Regulation, Company Search, available at https://companysearch.myfloridacfo.gov (last viewed
on March 15, 2023); e-mail correspondence from Kevin Jacobs, Director of Government Affairs for OIR, March 15, 2023.
35
S. 624.438(1), F.S.
36
S. 624.438(1)(b), F.S. STORAGE NAME: h0897.HRS PAGE: 7
DATE: 3/21/2023
The entity is not a health insurance issuer, or owned or controlled by a health insurance issuer
or by a subsidiary or affiliate of a health insurance issuer, other than to the extent such issuers
are member employers.
The bill provides an effective date of July 1, 2023.
B. SECTION DIRECTORY:
Section 1: Amends s. 624.438, F.S., relating to general eligibility.
Section 2: Provides an effective date of July 1, 2023.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
None.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. This bill does not appear to affect county or municipal governments.
STORAGE NAME: h0897.HRS PAGE: 8
DATE: 3/21/2023
2. Other:
None.
B. RULE-MAKING AUTHORITY:
OIR has sufficient rulemaking authority to implement the bill provisions.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES