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What the DOL Proposed Rule Change Means for Small Business

As healthcare legislation continues to evolve, the Department of Labor has been tasked with providing solutions and recommendations for the Affordable Care Act. Their most recent proposal includes changes to definitions of associations that could expand Association Health Plans. Blog 1 of this 3-part blog series will focus on “Commonality of Interest” and Sole Proprietors/Working Owners.

With the new proposed change, employer members with a “commonality of interest”, such as the same trade, industry, line of business, profession, or metropolitan area, even if the metropolitan area includes more than one state, would be allowed to provide health insurance plans to members. This will help small businesses who may have offices in a metropolitan area that includes 2 states (like Chicago/Northwest Indiana).

Some terms, like “metropolitan area” have not been defined by the new DOL proposed change, so let’s take a look at what this could mean. Let’s say we have an Association of Tile Workers that have joined together and want to form a health plan based on the needs of their members. They have members in 2 bordering states, and would be considered a “large group” with more than 100 participants. Under the proposed rule, they would be allowed to form an association and create an Association Health Plan. This is one of the proposed changes for which the DOL has requested feedback. There are many metropolitan areas across the country that border 2 or more states, such as; New York/New Jersey, Washington D.C./Virginia, Chicago/Northwest Indiana, Kansas City (which borders 2 states) and more.

The National Association of Insurance Commissioners are concerned with the proposed changes due to the pricing of different regions and metropolitan areas currently priced by state. Healthcare in Louisiana is a lot different than healthcare in Washington, so regulations and accurate pricing is a concern for carriers. Another issue for the DOL is how to define metropolitan areas. Should they use U.S. census data? How do they ensure that the metropolitan areas are correctly defined and managed.

A big change to the proposed ruling is related to sole proprietors and working owners. Currently, if an owner is also an employee of the small business, they are not eligible for health insurance because the business may not have any other employees. Under the proposed ruling, working owners can be treated as employer and employee – this is a huge opportunity for self-employed business owners to participate in an association health plan.

Over the next several months, the DOL will collect feedback from congressmen/women, business owners, chamber executives, insurance carriers and associations to determine how best to move forward on the proposed changes. We will continue our series on these proposed changes and provide updates as they become available. Stay tuned! These changes could have a very positive impact on Association Health Plans and small businesses around the country.