How EBSA Is Changing the Definition of an “Employer”

On January 5, the U.S. Department of Labor (DOL) Employee Benefit Security Administration (EBSA) proposed a rule that would change how an employer is defined under section 3(5) of Employee Retirement Income Security Act (ERISA) Association health plans. This proposal is intended to broaden the existing definition of an employer in an effort to expand access to affordable health coverage, specifically for small employers and self-employed individuals. The proposal was also developed in direct response to President Donald Trump’s executive order to expand access to association health plans.

In a press release announcing the Notice of Proposed Rulemaking, DOL stated that this proposal could make health coverage available to “up to 11 million Americans working for small businesses/sole proprietors and their families” who currently lack employer-sponsored health covered.

The proposal allows multiple employers to join together in an employer group or association to purchase group health coverage rather than each employer purchasing coverage independently. It accomplished this by changing the definition of an “employer” sponsor of an “employee welfare benefit plan” and “group health plan” as defined by ERISA.

As a single group, these employers may be able to purchase coverage in the large group market. Consequently, the Department expects “employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options.”

Critics of this proposed rule focus on the concerns over the increased risk of fraud and insolvency that could arise within these plans and the ability to regulate these plans effectively at the state and federal level. Additionally, concerns have been raised about the impact this proposal will have on the individual and small group market.

DOL has encouraged stakeholders to submit public comments on these changes, which are due March 6, 2018. Comments received to date are posted here.