Earlier this year, the Labor Department relaxed rules governing the formation of Association Health Plans (AHPs). (If you are not familiar with the Trump Administration’s rules expanding access to AHPs, see our prior article here.)

Unlike many other aspects of federal law, states still play a significant role in regulating AHPs. In the time since the federal AHP rules went into effect, five states have now responded by issuing guidance to mute the impact of federal action by limiting association health plans (AHPs) inside their borders.


The State of Connecticut Insurance Department issued a bulletin stating that small employers in Connecticut will continue to be treated as small employers for insurance rating purposes. This is sometimes called a “look through” rule because, instead of treating the AHP as the equivalent of a single large employer plan, Connecticut will “look through” the AHP to each individual employer. This “look through” rule applies whether the AHP is established in Connecticut or in another state if AHP members are located in Connecticut.

The point of the new AHP rule was to allow small employers to band together and purchase on the same terms as a single, larger employer. However, by applying the “look through” rule, small employers in an AHP have to continue to be offered policies that, among other requirements, are priced based in large part on the risks in their community, rather than the specific risk of the employer’s employees. Therefore, the “look through” rule undermines the ability of small employers to share their risk through an AHP.

Also, sole proprietors in Connecticut will not be able to participate in AHPs. This means they will need to buy individual coverage, which also means their risk cannot be shared with other employers in the AHP.

Finally, the Bulletin reaffirms that any self-funded multiple employer welfare arrangement (MEWA), which would include a self-funded AHP, must become licensed as an insurer. This is a MEWA or AHP where benefits are paid by the MEWA or AHP based on funds it collects from the participating employers and not through an insurance policy. Requiring a MEWA or AHP to be licensed as an insurer makes it practically unworkable for a self-funded MEWA/AHP to do business in Connecticut, particularly because of burdensome obligations to maintain large cash reserves and operate subject to rigorous auditing and reporting duties.


The Maryland Insurance Administration took a similar “look through” approach to Connecticut in its Bulletin 18-15. In Maryland, small employers will not get the benefit of pooling risk and being treated like they are part of a large employer if they buy through an AHP.

In addition, self-funded AHPs must satisfy insurance carrier licensing standards to provide health coverage in the state of Maryland. As in Connecticut, this makes a self-funded AHP practically unworkable in Maryland.


The Oregon Division of Financial Regulation issued Bulletin 2018-07 to confirm existing rules that apply to AHPs. The bulletin also makes clear that Oregon’s rules apply to any association offering a health plan, whether the association is established in Oregon or any other state.

For fully-insured AHPs, this means they must meet Oregon’s existing rules for an association. Perhaps most importantly, Oregon will also apply the “look through” rule, similar to what was described above for Connecticut and Maryland. In short, at least in Oregon, small employers in an AHP will not get the benefit of combining risks with other employers in the AHP.

For AHPs that are self-funded, the association must have been engaged in a substantive business activity beyond offering a plan. The Association must also have operated for at least two years prior to giving members the opportunity to buy health coverage. Finally, it must include five or more employers that are in the same trade, business, or industry. That means Chambers of Commerce or similar AHPs that are based on common geography cannot sponsor an AHP that covers Oregon businesses, even though that is permitted under the federal rules.

Washington State

In a letter dated August 29, 2018, the Washington State Insurance Commissioner confirmed that self-funded AHPs are prohibited in Washington. Therefore, any employer approached to join an AHP in Washington must make sure that the AHP is insured.


State guidance trickling in thus far affirms what we said previously: it is the states that will ultimately determine whether AHPs gain traction. As the above guidance makes clear, some states do not want to allow the new AHPs to operate within their borders due to consumer protection concerns. Employers considering joining an AHP should consult with their HUB Advisor or experienced benefits or insurance counsel to determine if the AHP is permitted in their state.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.


The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.