Association Health Plan
An association health plan is a type of group health insurance plan that is sponsored by a bona fide association. An association health plan may be fully-insured or self-insured (otherwise known as self-funded). In a fully-insured plan, the association transfers the financial obligation for future medical claims to a third-party insurance company in exchange for premiums paid to that insurer. In a self-insured model, the association retains the financial obligation for future medical claims but may use a “stop-loss” insurance policy to protect against catastrophic expenses.
An association health plan is a type of “employee welfare benefit plan”as that term is defined in ERISA. Inasmuch as an association allows multiple employers to belong to a single association sponsoring a health plan, an association health plan is also a MEWA. All the employers within an association sponsoring a health plan under the new Department of Labor rules must have a commonality of interest. This commonality can either be professional or regional. In a professional commonality, the employers belonging to the association must share the same industry, profession, or line of business. In contrast, a regional commonality has the employers belonging to the association share the same geography (e.g. a county, metro area, or state) as their principal place of business.
For a more detailed discussion, see “What is an association health plan?”