Nondiscrimination Requirements for Association Health Plans

Otherwise eligible plan applicants may not be denied eligibility (or continued eligibility) to enroll in an association health plan based on health factors. A plan participant may not be charged a higher premium than similar plan participants on the basis of a health factor. Health factors, in this context, include:

• Health status (e.g. obesity)
• Pre-existing physical medical conditions
• Pre-existing mental illnesses
• Medical claims history
• Medical history
• Genetic information (see comments below)
• Disability
• Evidence of insurability

The exclusion of health factors from health plan eligibility considerations prohibits association health plans from requiring a medical exam as a condition of enrollment. A health questionnaire may be given to applicants but it cannot be used to “deny, restrict, or delay eligibility or benefits, or to determine individual premiums.”

Association health plans are also forbidden from excluding coverage for a specific disease or excluding or limiting benefits for certain types of treatments or medications if such exclusions and imitations are directed at individual plan participants or their beneficiaries due to health factors.

Title I of the Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits association health plans from discrimination stemming from genetic information on individuals. For example, an association health plan cannot vary premiums among participants based on each participant’s genetic information. Additionally, plans are generally prohibited from using genetic information (including the family medical history of a participant or beneficiary) in enrollment determinations. An association health plan is also prevented from requiring an applicant or a participant from submitting to genetic test requirements.

The Department of Labor provided the following examples, summarized below, to illustrate various dimensions of the nondiscrimination requirements under the new association health plan regulation:

Example One

(i) Facts. Association A offers group health coverage to all members. According to the bylaws of Association A, membership is subject to the following criteria: All members must be restaurants located in a specified area. Restaurant B, which is located within the specified area, has several employees with large health claims. Restaurant B applies for membership in Association A, and is denied membership based on the claims experience of its employees.

(ii) Conclusion. In this Example One, Association A’ s exclusion of Restaurant B from Association A discriminates on the basis of claims history, which is a health factor. Accordingly, Association A does not satisfy the requirements for an association health plan, and, therefore would not meet the definition of a bona fide group or association of employers.

Example Two

(i) Facts. Association C offers group health coverage to all members. According to the bylaws of Association C, membership is subject to the following criteria: All members must have a principal place of business in a specified metropolitan area. Individual D is a sole proprietor whose principal place of business is within the specified area. As part of the membership application process, Individual D provides certain health information to Association C. After learning that Individual D has diabetes, based on D’ s diabetes, Association C denies Individual D’ s membership application.

(ii) Conclusion. In this Example Two, Association C’ s exclusion of Individual D because D has diabetes is a decision that discriminates on the basis of a medical condition, which is a health factor. Accordingly, Association C does not meet the definition of a bona fide group or association of employers.

Example Three

(i) Facts. Association F offers group health coverage to all plumbers working for plumbing companies in a State, if the plumbing company employer chooses to join the association. Plumbers employed by a plumbing company on a full-time basis (which is defined under the terms of the arrangement as regularly working at least 30 hours a week) are eligible for health coverage without a waiting period. Plumbers employed by a plumbing company on a part-time basis (which is defined under the terms of the arrangement as regularly working at least 10 hours per week, but less than 30 hours per week) are eligible for health coverage after a 60-day waiting period.

(ii) Conclusion. In this Example Three, making a distinction between part-time versus full-time employment status is a permitted distinction between similarly-situated individuals, provided the distinction is not directed at individuals. Accordingly, the requirement that plumbers working part time must satisfy a waiting period for coverage is a rule for eligibility that does not violate requirements for an association health plan.

Example Four

(i) Facts. Association G sponsors a group health plan, available to all employers doing business in Town H. Association G charges Business I more for premiums than it charges other members because Business I employs several individuals with chronic illnesses.

(ii) Conclusion. In this Example Four, the employees of Business I cannot be treated as a separate group of similarly-situated individuals from other members based on a health factor of one or more individuals. Therefore, charging Business I more for premiums based on one or more health factors of the employees of Business I does not satisfy the requirements for an association health plan.

Example Five

(i) Facts. Association J sponsors a group health plan that is available to all members. According to the bylaws of Association J, membership is open to any entity whose principal place of business is in State K, which has only one major metropolitan area, the capital city of State K. Members whose principal place of business is in the capital city of State K are charged more for premiums than members whose principal place of business is outside of the capital city.

(ii) Conclusion. In this Example Five, making a distinction between members whose principal place of business is in the capital city of State K, as compared to some other area in State K, is a permitted distinction between similarly-situated individuals, provided the distinction is not directed at individuals. Accordingly, Association J’ s rule for charging different premiums based on principal place of business does not violate the requirements for an association health plan.

Example Six

(i) Facts. Association L sponsors a group health plan, available to all its members. According to the bylaws of Association L, membership is open to any entity whose principal place of business is in State M. Sole Proprietor N’ s principal place of business is in City O, within State M. It is the only member whose principal place of business is in City O, and it is otherwise similarly situated with respect to all other members of the association. After learning that Sole Proprietor N has been diagnosed with cancer, based on the cancer diagnosis, Association L changes its premium structure to charge higher premiums for members whose principal place of business is in City O.

(ii) Conclusion. In this Example Six, cancer is a health factor. Making a distinction between groups of otherwise similarly situated individuals that on its face is based on geography (which is not a health factor), but that is directed at one or more individuals based on a health factor (cancer), is in this case a distinction directed at an individual and is not a permitted distinction. Accordingly, by charging higher premiums to members whose principal place of business is City O, Association L violates for an association health plan.

Example Seven

(i) Facts. Association P is an agriculture industry association. It sponsors a group health plan that charges employers different premiums based on their primary agriculture subsector, defined under the terms of the plan as: Crop farming, livestock, fishing and aquaculture, and forestry. The distinction is not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example Seven, the premium distinction between members is permitted because it is not based on a health factor and is not directed at individual participants and beneficiaries based on a health factor.

Example Eight

(i) Facts. Association Q is a retail industry association. It sponsors a group health plan that charges employees of employers different premiums based on their occupation: Cashier, stockers, and sales associates. The distinction is not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example Eight, the premium distinction is permitted because it is not based on a health factor and is not directed at individual participants and beneficiaries based on a health factor.

Example Nine

(i) Facts. Association R sponsors a group health plan that is available to all employers with a principal place of business in State S. Employers are charged different premiums based on their industry subsector, defined under the terms of the plan as: Construction, education, health, financial services, information services, leisure and hospitality, manufacturing, transportation, natural resources, and other. In addition, within any employer, employees are charged different premiums based on part-time versus full-time status (part time status is defined, under the terms of the plan, as regularly working at least 40 hours, but less than 120 hours, per month). These distinctions are not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example Nine, the premium distinctions between employer members of a State AHP based on industry, and between employees of employer members who are working part-time versus full-time, are permitted because these distinctions are not based on a health factor or directed at individual participants and beneficiaries based on a health factor.

Example Ten

(i) Facts. Association T sponsors a group health plan that offers a premium discount to participants who participate in a wellness program that complies with guidelines applicable to a wellness program offered by an association health plans.

(ii) Conclusion. In this Example Ten, providing a reward (such as a premium discount or rebate, a waiver of all or part of a cost-sharing mechanism, an additional benefit, or any financial or other incentive, as well as avoiding a penalty such as the absence of a premium surcharge or other financial or nonfinancial disincentive) in return for adherence to a compliant wellness program is permissible.