Oregon Division of Financial Regulation Bulletin No. DFR 2018-07: Regulation of Association Health Plans

(BS I Consumer and
'-/
1 Business Services
350 Winter Street NE, Room 200, P.O. Box 14480, Salem, Oregon 97309-0405 503-947-7872 dcbs.oregon.gov TO:
DATE:
RE:
I. Purpose
Oregon Division of Financial Regulation Bulletin No. DFR 2018-07 Issuers of Health Benefit Plans to Associations in the Oregon Health Insurance Market, Association Purchasers of Health Benefit Plan Coverage, Multiple Employer Welfare Arrangements, and Agents and Producers Licensed to Sell Health Plans in Oregon September l 0, 201 8 Regulation of Association Health Plans in Oregon The Oregon Division of Financial Regulation (the division) has received numerous inquiries about its guidance concerning associations and Multiple Employer Welfare Arrangements (MEW As). 1 This bulletin summarizes and clarifies guidance for issuers, associations, MEW As, insurance agents, and producers in light of the recent United States Department of Labor (DOL) final regulati on titled "Definition of Employer Under Section 3(5) of ERISA-Association Health ? Plans" (AHP rule). - As explained below, the AHP rule does not preempt the Oregon Insurance Code, which limits the types of associations and MEW As that may purchase or issue a health benefit plan in Oregon. 3 The division will take action against an issuer, association, MEW A, agent, or broker fo r any failure to comply with or attempt to circumvent Oregon statutory or regul atory requirements with respect to health benefit plan coverage offered by or to an association. This includes Oregon 's requirements regarding the establishment of such groups, the provision of essential health benefits, and other consumer protections.
II. Background
The AHP rule seeks to establish new, less stringent criteria to determine whether a group or association is a "bona fide association" under federal Jaw by redefining the term "employer" in
Section 3(5) of ERISA. 4 Importantly, the preamble to the final rule makes clear that the AHP
rule does not modify or otherwise limit existing state authority to regulate association health plans (AHPs) under section 514 of ERISA.5 1 See, e.g. Division Bulletin 20 13-3, regard ing "Associatio n Coverage under the Affordable Care Act (ACA)," avai I able at ht tps://dfr.oregon. gov/laws-rules/Documcnts/Bul le tins/bul letin20 13-03.pdf. 2 83 Fed. Reg. 289 12 (20 18) 3 "Health benefit plan" is defi ned in ORS 743B.005. ~ See 29 CFR § 25 10.3-5 5 83 Fed. Reg. 28936 (20 18)

In the case of a fully insured AHP, state insurance laws continue to apply to any insurance policies purchased by the AHP. States may subject fully insured AHPs to licensing, registration, certification, financial reporting, examination, audit, and any other requirement of state insurance law necessary to ensure compliance with state insurance reserve, contribution and funding obligations. In the case of a less than fully insured AHP, any state law that regulates insurance may apply to the extent the law is "not inconsistent" with ERISA. The AHP rule thus does not prohibit continued application of state insurance laws to coverage issued by or to an association. As noted above, this bulletin is meant to summarize relevant Oregon law and guidance in response to inquiries received following issuance of the AHP rule.
III. Guidance for insurers and other regulated entities
The AHP rule clearly states that AHPs are a type of MEW A under ERISA. As noted above, the preamble to the AHP rule also says the rule has no impact on, and does not preempt state regulation of MEW As pursuant to ERIS A § 514. 6 Indeed, the AHP rule states that the application and coordination of state insurance law remains the province of the states. 7 As a result, AHPs - whether established in Oregon or another state - are subject to the same statutory and regulatory requirements as any other group or association of employers that may offer health benefit plan coverage in Oregon. The division will continue to enforce all Oregon laws applicable to health benefit plans issued by or to a group or association of employers as they existed prior to the issuance of the AHP rule without modification. These requirements are summarized below. With respect to fully insured associations:

• For a group or association of employers to purchase a group health benefit plan in
  Oregon, the group or association must meet specific requirements under the Insurance Code. ORS 743.524 establishes the eligibility requirements for an association to be a group health policyholder in Oregon. ORS 743.524 prohibits an insurer from issuing a group health insurance policy to an association unless the Director determines that the association meets the requirements of ORS 73 1.098. Among other requirements, ORS 73 1.098 requires that an association be in existence for at least one year and be organized in good faith priniarily for purposes other than obtaining insurance. [Emphasis added.]
• For purposes of determining which market requirements apply to health benefit plan
  coverage issued to an association, the division will continue to apply the "look through" 6 Despite this sta ted lack of preemption, the d ivisio n is concerned about the negati ve effects the new DOL rule will have on Oregon's individual and small group marke ts. Accordingly, on July 26, 20 18, the State of Oregon, in conjunction with ten other states and the Distric t o f Columbia, filed a lawsuit in the United States District Court for the Southern District of New York. This suit alleges, among other things, that the AHP rule is contrary to settled law and legislative intent, that the rule exceeds the Department of Labor's authority, and that the rule is impermissibly arbitrary and capricious. The plaintiff states seek various forms of declaratory and injunctive relief, including a request that the Court vacate and set aside the AHP rule. As evidenced by Oregon's participation in the aforementioned lawsuit, the division be lieves that significant doubt exists as to the legality and enforceability of the AHP rule. Be that as it may, the AHP rule does not alter Oregon law governing AHPs. 7 83 Fed. Reg. 28925 (20 18).

•

• approach established in previous bulletins and federal guidance. 8 The Oregon Insurance
  Code generally requires that health benefit plan coverage issued to an individual or a small employer through an association must comply with the requirements that would otherwise apply in the individual or small employer market. These requirements include state rating and benefit requirements such as single risk pool, community rating, and provision of essential health benefits. The di vision has also recognized that, in limfred circumstances, a group maef be deemed to exist at the association level rather than the participating employer level. In this respect, the division has adopted the ERISA allowance for bona fide associations that existed prior to the issuance of the AHP rule. Under this standard, an associati on may be treated as the single sponsoring employer of a group health benefit plan if (and only if) the employer members of the association exercise control over the association's health benefit plan and, based on all facts and circumstances, the association has a sufficiently close economic or representational nexus (i.e. a "conunonality of interest") with the employers and employees that participate in the plan. 10 The division will continue to recognize this allowance for bona fide associations. Consistent with existing practices, a carrier that wishes to issue health benefit plan coverage to an association with Oregon members must receive the division's approval prior to issuing coverage. A carrier that wants to issue large employer coverage to an association based on the allowance fo r bona fide associations described above must have a corporate officer attest to the association's compliance with this standard and submit a legal analysis from an ERISA attorney demonstrating that the standard is met. 11 Similarly, if an association that was previously determined to meet this standard wishes to make changes, the carrier insuring that association must submit the proposed changes and receive the division's approval prior to implementing the changes. 12 8 See Bulletin 20 13-3, cited above. Also "Application of Individual and Group Marke t Req uirements unde r Title XXVTI of the Public Health Service Act when Insurance Coverage Is Sold to, or through, Associations" available at https://www.cms.gov/CCUO/Resourccs/Files/Downloads/associatio n coverage 9 I 20 11.pdf 9 Id. 10 See U.S. Department of Labor Ad visory Opinions 94-07 A and 20 I 7-02AC, both finding that "A determinatio n whe the r a purported group or associatio n of empl oyers is a bona fide employer group or associatio n must be made on the basis of all the facts and circumstances involved. Among the factors considered are the following: how members are solic ited; who is entitled to participate and who actua lly participates in the associati on; the process by which the associatio n was formed, the purposes for which it was formed , and what, if any, were the preexisting relationships of its members; the powers, rights, and privileges of employer members that exist by
  reason of the ir status as employers; and who actua lly controls and directs the acti vities and operations of the benefit program. In the view o f the Department, the employers that participate in a benefit program must, e ither d irectly or indirectly, exerc ise control over that program, both in form and in substance, in order to act as a bona fi de employer group or assoc iation with respect to the program." See also U.S. Department of Labor Advisory Opinion 2008-07 A, fi nding that the Bend, Oregon, Chamber of Commerce did not have a "common economic or representation interest or genuine organi zati onal relationship unrelated to the provision of benefits," and therefore was not exempt from Oregon stale insurance regulation. 11 See the d ivision's Form 440-244 JA, 'Transmittal and Standards for Group Health Coverage to be issued to an Association, Union Trust, Trust Group, Credit Unio n or fully insured Multiple Employer We lfa re Arrangement (MEWA)" is available at: https://dfr.oregon.gov/rates-forms/Documents/244 1 a.pdf 12 ORS 743.524(3).

With respect to less than. f ully insured associations:

• The AHP rule does not modify the existing regul atory framework that subjects less than
  fuJJ y insured MEW As to state insurance law under ERISA section 514. An association or group of employers that wants to provide health benefits through a MEW A in Oregon must obtain a certificate of MEW A under ORS 750.303 prior to offering health benefits and must comply with the requirements of ORS 750.301 to 750.341.
• ORS 750.307 establishes requirements for an association or group to establish a MEW A
  in Oregon. Among other requirements, ORS 750.307 requires that an association or group of employers maintaining a MEWA must be composed of five or more employers in the same trade, business or industry, must be engaged in substantive business activity other than sponsorship of an employee welfare benefit plan, and must have been in existence for at least two years prior to the date of application for a certificate of MEW A. [Emphasis added.] ORS 750.3 11 requires MEW As established in another state to obtain an Oregon MEW A certificate before offering health benefits in Oregon.
• ORS 750.307(1) also requires that a MEWA be composed of employers in the same trade
  or industry. Accordingly, the division wiJJ not issue a certificate of MEW A to a group or association of employers that accepts employer members from multiple trades or industries, even if aJJ employers participating in the MEW A have a principal place of business in the same geographic area. Nothing in this buJJetin shaJJ be construed to limit the division's authority under the Oregon Insurance Code or its ability to continue enforcing the Jaws of the State of Oregon. This bulletin takes effect immediately. It remains in effect until amended by a further BuJJetin of the Division of Financial Regulation. Andrew Stolfi Administrator, Division of Financial Regulation Insurance Commissioner Date