HB 3923 by Representative Oliverson seeks to align state law regarding association health plans – those offered by business or professional associations to their members — with federal rules finalized in June 2018 and subsequently invalidated by a federal district court in March 2019. The ruling was appealed, but remains in effect. In other words, even if this bill is passed, much of it could not be implemented today. The appeals court recently placed a temporary hold on the appeal. Any efforts to align state law with the vacated rules may prove fruitless. Key changes sought under these bills are preempted under ERISA today and may remain so.
Regardless of the outcome of litigation on federal association health plan rules, it would be unwise to reduce Texas consumer protections for association health plans as this bill does. The National Association of Insurance Commissioners (NAIC) has described these plans as having “a colorful and troubling history” and being “notoriously prone to insolvencies.” State guardrails for association health plans weakened by the bill were put into place in response to the long and well-documented history of fraud, abuse, and unpaid claims stemming from these plans. Unlike most states, Texas does not require that self-funded association health plans be licensed as insurers, and instead applies less financial oversight and fewer consumer protections.
According to the NAIC “[w]hile the promise of [these plans] has always been to give small employers access to low cost health coverage on terms similar to those available to large employers, that promise has never been the reality.” MEWAs, in fact, can actually drive up premiums for individuals and small businesses that need comprehensive coverage. MEWAs are allowed to play by different rating and benefit rules, and can leverage that advantage to cherry-pick healthier customers out of the small employer and individual markets, causing their premiums to rise.
Read our full testimony here.