--- title: "SMALL EMPLOYERS CAN FORM ASSOCIATION HEALTH PLANS TO LOWER COSTS" description: "" url: "https://wimlaw.com/publications/newsletters/august-2018/small-employers-can-form-association-health-plans-to-lower-costs" date: "2026-06-03T08:50:42+00:00" language: "en-US" --- # SMALL EMPLOYERS CAN FORM ASSOCIATION HEALTH PLANS TO LOWER COSTS Written on March 31, 2020. Employers, particularly small employers and working owners, have a new way to control healthcare costs as a result of a Department of Labor (DOL) rule published in the *Federal Register* on June 21, 2018. President Trump in October 2017 signed an Executive Order directing the DOL to issue rules governing the formation and management of association health plans (AHPs), greatly expanding the potential use of these plans. The new rule will allow working owners and small businesses to band together, bound by geography or industry, to create a health plan that would be allowed to function like a large single employer plan. That is, by participating in AHPs, employees of small employers or working owners will be able to obtain coverage that is not subject to the regulatory complexity and burden that currently characterizes the market for individual and small group health coverage. Therefore, such AHPs can enjoy flexibility with respect to benefit package designs comparable to that enjoyed by large employers. AHPs also may help reduce the cost of health coverage to participating employer members by giving groups of employers increased bargaining power. AHPs will not be subject to the Affordable Care Act (ACA) requirements of providing a long list of essential health benefits. Essential health benefits that AHPs can choose not to provide include prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, pediatric services, oral and vision care, and others. DOL reports that up to 11 million people who are sole proprietors or work for small employers currently lack employer-sponsored insurance. The U.S. Congressional Budget Office predicts that 400,000 people who would have been uninsured will enroll in AHPs and 3.6 million people will enroll in AHPs who would have had other coverage, resulting in 4 million additional people enrolling in AHPs. AHPs will remain regulated, however, by other laws, including the non-discrimination requirements of the Health Insurance Portability and Accountability Act (HIPAA). The new rule makes clear through examples, however, that employment-based classifications such as part-time or full-time do not violate the HIPAA non-discrimination requirements and may be used in determining eligibility or setting rates. AHPs also will remain subject to regulation under state laws governing Multiple Employer Welfare Arrangements (MEWAs) and are still subject to certain other federal mandates including coverage of mental health benefits, no lifetime or annual limits on certain benefits, and non-discrimination provisions. States might choose to support the new regulation, or they might implement their own requirements such as benefits, reserves and structure, or even reject certain types of AHPs. AHPs will continue to be prohibited from refusing to cover individuals with pre-existing conditions and from charging those with pre-existing conditions more in premiums. The new rule contains a provision that participation in an AHP will not subject employers to joint employer liability under any other federal or state rule. It also states that a business will not be considered an employer of its independent contractors merely by its participation in an AHP with its independent contractors. Although AHPs in some form have existed for many years, the old rules provided that an AHP had to have an overwhelming commonality of interest for their members unrelated to the provision of healthcare benefits. Further, the old association rules could not include self-employed individuals. The new rule only requires that any association organizing an AHP must have at least one substantial business purpose unrelated to providing health coverage. An association can also establish a subsidiary or subgroup of its members along relevant industry or business lines to serve as the "employer" for purposes of the plans, so that the provisions of the new rule would apply to the subgroup level, including the requirement that the group be controlled by its employer members. Some groups expressed concerns about the new AHP program, warning that such "skinny" healthcare plans would cause healthy people to leave the ACA marketplace resulting in a less healthy population in ACA plans. DOL has established an applicability date of September 1, 2018, for fully-insured AHPs, an applicability date of January 1, 2019 for existing self-insured AHPs complying with the Department's pre-rule test, and an applicability date of April 1, 2019 for new self-insured AHPs formed pursuant to the new rule. - [](https://x.com/intent/post?url=https%3A%2F%2Fwimlaw.com%2Fpublications%2Fnewsletters%2Faugust-2018%2Fsmall-employers-can-form-association-health-plans-to-lower-costs.md&text=) - [](https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fwimlaw.com%2Fpublications%2Fnewsletters%2Faugust-2018%2Fsmall-employers-can-form-association-health-plans-to-lower-costs.md) - [](https://www.linkedin.com/sharing/share-offsite/?url=https%3A%2F%2Fwimlaw.com%2Fpublications%2Fnewsletters%2Faugust-2018%2Fsmall-employers-can-form-association-health-plans-to-lower-costs.md) - [](mailto:?subject=SMALL%20EMPLOYERS%20CAN%20FORM%20ASSOCIATION%20%20HEALTH%20PLANS%20TO%20LOWER%20COSTS) ## Related Content ## Get Email Updates Receive newsletters and alerts directly in your email inbox. Sign up below. ## Recent Content [ August 2018 ](https://wimlaw.com/index.php?option=com_content&view=category&id=170) [ ![ai, human reach out](https://wimlaw.com/media/yootheme/cache/f1/igor-omilaev-FHgWFzDDAOs-unsplash-f12346e8.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1582:fcra-litigation-challenges-employers-ai-hiring&catid=53)### [FCRA Litigation Challenges Employers’ Use of AI Hiring Platforms](https://wimlaw.com/index.php?option=com_content&view=article&id=1582:fcra-litigation-challenges-employers-ai-hiring&catid=53) [Employment Law Newsletter: A Monthly Report On Labor Law Issues](https://wimlaw.com/index.php?option=com_content&view=category&id=53) A January 20, 2026, class action filed against Eightfold AI, Inc. in California is sending shockwaves through the employer and AI community… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1582:fcra-litigation-challenges-employers-ai-hiring&catid=53) [ ![danger sign, skull](https://wimlaw.com/media/yootheme/cache/01/mikael-seegen-jX6WXNkvsPs-unsplash-01c1ebef.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1584:ai-research-discovery-requests-dangers&catid=53)### [The Dangers of Employers Using AI Research Tools as to Discovery Requests from Plaintiffs](https://wimlaw.com/index.php?option=com_content&view=article&id=1584:ai-research-discovery-requests-dangers&catid=53) [Employment Law Newsletter: A Monthly Report On Labor Law Issues](https://wimlaw.com/index.php?option=com_content&view=category&id=53) A second “bombshell” affecting HR pertaining to AI is a federal court ruling in New York, that a defendant’s use of AI in researching and p… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1584:ai-research-discovery-requests-dangers&catid=53) [ ![CHAT GPT](https://wimlaw.com/media/yootheme/cache/64/emiliano-vittoriosi-fvxNerA8uk0-unsplash-64a16be4.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1585:ai-employer-protection&catid=53)### [Two Subsequent Cases Protect Defendant’s Use of AI as Subject to Work-product Protection](https://wimlaw.com/index.php?option=com_content&view=article&id=1585:ai-employer-protection&catid=53) [Employment Law Newsletter: A Monthly Report On Labor Law Issues](https://wimlaw.com/index.php?option=com_content&view=category&id=53) Soon after the deciding of the above-discussed case on February 17, 2026, in U.S. v. Heppner, a criminal case in the District Court for the… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1585:ai-employer-protection&catid=53) [ ![avoid, wave away](https://wimlaw.com/media/yootheme/cache/6f/priscilla-du-preez-NQTphr4Pr60-unsplash-6fb4df83.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1586:employer-avoid-waiving-privileges-ai-research&catid=53)### [Is There Anything an Employer Can Do to Avoid Waiving Privileges in Using AI Research Tools?](https://wimlaw.com/index.php?option=com_content&view=article&id=1586:employer-avoid-waiving-privileges-ai-research&catid=53) [Employment Law Newsletter: A Monthly Report On Labor Law Issues](https://wimlaw.com/index.php?option=com_content&view=category&id=53) There are no easy answers to the above question, but some general observations will nevertheless be made. First, the New York district cou… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1586:employer-avoid-waiving-privileges-ai-research&catid=53) [ ![ai visualization](https://wimlaw.com/media/yootheme/cache/45/milad-fakurian-5yWtM3M3JKM-unsplash-45306e6d.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1587:ai-legal-recommendations&catid=53)### [Suggestions on Use of AI](https://wimlaw.com/index.php?option=com_content&view=article&id=1587:ai-legal-recommendations&catid=53) [Employment Law Newsletter: A Monthly Report On Labor Law Issues](https://wimlaw.com/index.php?option=com_content&view=category&id=53) Perhaps the starting point is to look at the type of AI platforms generally available. At a recent conference about AI use for HR, speaker… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1587:ai-legal-recommendations&catid=53) [ ![june 2026 legal immigration webinar promo graphic](https://wimlaw.com/media/yootheme/cache/45/june-2026-webinar-immigration-453d45bc.jpg) ](https://wimlaw.com/index.php?option=com_content&view=article&id=1583:worksite-enforcement-tps-parole&catid=221)### [Worksite Enforcement and TPS and Parole Status Update](https://wimlaw.com/index.php?option=com_content&view=article&id=1583:worksite-enforcement-tps-parole&catid=221) [Webinars: Employment Law "Hot Topics"](https://wimlaw.com/index.php?option=com_content&view=category&id=221) The webinar will cover how to deal with a worksite enforcement action and various types of immigration enforcement activities. The webinar… [Read more](https://wimlaw.com/index.php?option=com_content&view=article&id=1583:worksite-enforcement-tps-parole&catid=221) ### Additional Legal Resources [### Newsletter Explore ](https://wimlaw.com/publications/newsletters) [### Books Explore ](https://wimlaw.com/publications/books) [### Alerts Explore ](https://wimlaw.com/alerts) [### Articles Explore ](https://wimlaw.com/articles) [### Audits Explore ](https://wimlaw.com/audits) [### Events Explore ](https://wimlaw.com/events) ## Schema ```json { "@context": "https://schema.org", "@type": "BreadcrumbList", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://wimlaw.com" }, { "@type": "ListItem", "position": 2, "name": "Publications", "item": "https://wimlaw.com/publications" }, { "@type": "ListItem", "position": 3, "name": "Newsletters", "item": "https://wimlaw.com/publications/newsletters" }, { "@type": "ListItem", "position": 4, "name": "August 2018", "item": "https://wimlaw.com/publications/newsletters/august-2018" }, { "@type": "ListItem", "position": 5, "name": "SMALL EMPLOYERS CAN FORM ASSOCIATION HEALTH PLANS TO LOWER COSTS", "item": "https://wimlaw.com/publications/newsletters/august-2018/small-employers-can-form-association-health-plans-to-lower-costs" } ] } ```