On August 26, North Carolina passed a law allowing small businesses to band together to offer group health insurance through association health plans (“AHPs”). The Small Business Health Care Act, passed without the governor’s signature, authorizes the formation of large group health plans for association members, including small businesses and sole proprietors. However, these plans can be implemented only if they do not violate federal law, and the federal regulations authorizing this form of AHPs were struck down at the U.S. District Court for the District of Columbia earlier this year. While this decision is currently on appeal at the D.C. Circuit, North Carolina has included in its legislation a back-up plan that the state can pursue expansion of AHPs in case the federal regulations remain struck down.
The U.S. Department of Labor issued regulations last June expanding the situations under which AHPs could be formed. These regulations were created in response to a push by the Trump administration to provide greater choice in health care coverage. Proponents of the regulations believed that the expansion of AHPs could make coverage more affordable and accessible for small business employees and sole proprietors. The regulations, however, were met with significant criticism on the grounds that AHPs would undermine the Patient Protection and Affordable Care Act (“ACA”), create instability in the ACA marketplaces, and lead to gaps in patient protection and coverage. This March, as noted in a prior C&M alert, the U.S. District Court for the District of Columbia struck down these regulations.