An association health plan (AHP) is a way in which multiple employers can collectively sponsor a group health insurance plan for their employees. In essence, an AHP is the aggregation of employees from many small businesses into a single large unit. The scale objective of the single bargaining unit is greater leverage in insurance purchase negotiations than would be the case for any single employer within the AHP, and it also enables the AHP to operate as a large group health plan governed by the Employee Retirement Income Security Act of 1974 (ERISA) and thus avoid some costly federal and state regulation. ERISA is a federal statute governing, among other activities, large group employer-provided health coverage. ERISA plans cover approximately 133 million Americans through their employers.
Legally, an AHP can only aggregate employees across its member employers if the AHP itself is bona fide. A bona fide AHP satisfies conditions relating to matters such as the commonality of interest shared among the employers within the association to the control of the association and its health plan by these employers. If an AHP is not bona fide, each employer’s health coverage within the AHP would be determined by the number of workers employed at that single business, not the aggregate number of employees within the association.
