A controversial small business health insurance bill became law in North Carolina on Oct. 1.

However, as the 2020 employer health-insurance enrollment period nears, the Association Health Plans envisioned under Senate Bill 86 are stuck in limbo with most, if not all, of the plans likely not available for next year.

SB86 permits small businesses to use associations, such as chambers of commerce, to obtain health-care plans.

The uncertainty comes as health insurers, advocacy groups and state legislators are fielding inquiries about how small businesses can sign up for an AHP.

Supporters estimate that about 110,000 North Carolinians, or about 1% of the population, could benefit from signing up for an AHP. NC Realtors said about 6,000 of its 45,000 members could qualify.

“SB86 has the provision for North Carolina AHPs to wait for the federal lawsuit against the new Trump (administration) federal AHP rules before making an AHP effective in North Carolina, said Hughes Waren Jr., chairman of the N.C. Association of Health Underwriters’ General Assembly action committee.

“In my opinion, we will not know any actions from the federal courts until first quarter of 2020.

“Once a N.C. AHP moves forward with creating a plan with an insurance carrier, that setup could take several months,” Waren said.

Legal challenges

The bill was promoted as loosening the requirements for AHPs in N.C. in response to federal Labor Department changes made in June 2018 under the Trump administration. There are 24, mostly Republican-leaning, states offering some form of an AHP.

However, on March 28, a federal District Court judge struck down the final U.S. Labor Department ruling. Labor officials filed an appeal April 26.

On April 29, U.S. Labor said it would not enforce violations stemming from good faith reliance on the AHP rule’s validity, as long as businesses in an AHP meet their responsibilities to pay health-benefit claims as promised.

“There are still pending legal challenges to the federal law that this state law is based on,” Blue Cross Blue Shield N.C. spokesman Austin Vevurka said Monday. “Currently, a federal court has taken issue with associations based on geography and associations that contain sole proprietors.

“Until the federal law is settled, we can’t implement the state law.”

The state health underwriters association, representing more than 3,000 insurance agents, brokers and consultants, released a statement in August in which it encouraged Democratic Gov. Roy Cooper to sign the bill. Cooper allowed the bill to become law without his signature Aug. 25.

“The adoption of enabling legislation for Association Health Plans will provide self-employed individuals, small business owners, and gig-economy workers and their families an affordable health insurance option,” the health underwriters association said

The association was joined in its advocacy by the N.C. Chamber, N.C. Realtors, N.C. Retail Merchants Association, N.C. Restaurant and Lodging Association and N.C. Farm Bureau.

Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation, said that “not all potential beneficiaries of (SB86) would have known about the legal action. But that’s true of most legislation.”

“The small-business interests that pushed hardest for AHPs knew what was happening at the federal level and the potential for delays in implementation. They knew that state action was necessary — but not sufficient — for AHPs to move forward.”

Criticism of AHPs

SB86 passed 32-9 in the Senate on Aug. 13 and 82-32 in the House on Aug. 7.

Cooper agreed to let the bill become law even though his preference remains expanding Medicaid.

“People have a right to be frustrated with the cost of private health insurance plans,” Cooper wrote Aug. 25.

“But even though there is significant bipartisan support for this legislation, my concerns about the legality of these cheaper plans and their potential negative effects on health care prevent me from signing the bill.”

“The governor has made a wise decision to allow the Small Business Health Care Act to become law,” Sen. Joyce Krawiec, R-Forsyth, said. “Big business has had this opportunity for many years, and now there will be an even playing field for small business as well.”

SB86 piggybacks on previous AHP legislation, such as permitting a grouping of employers in the same industry or line of business in an AHP. Employers with up to 50 workers could qualify.

As an example, Krawiec cited the possibility of the Winston-Salem, Greensboro and High Point chambers of commerce joining forces to form an AHP.

Critics of AHPs say giving small employers access to the flexibility of larger employers could lead to those plans opting out of providing 10 essential health-care benefits required in the federal marketplace under the ACA.

Those benefits are: ambulatory or outpatient services; emergency services; hospitalization; maternity and newborn care; behavioral health services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services, and chronic disease management; and pediatric services, including oral and vision care.

The AHP has to be offered by a nonprofit with at least 500 members and having been in business for at least two years for reasons beyond providing insurance, such as a chamber of commerce or a trade group.

There were several advocacy groups that opposed SB86 for not going far enough to protect adequate health insurance. They included the N.C. Justice Center and the March of Dimes.

Cooper wrote that AHPs, “if they survive legal challenge, can take us back to a time when people can be discriminated against for pre-existing conditions in addition to driving up health care costs for everyone else.”

John Dinan, a political science professor at Wake Forest University and a national expert on state legislatures, said that the North Carolina law "appears to be crafted in a focused fashion, so that the association health plans covered by the law would be mostly unaffected by on-going federal litigation."

"Even so, groups offering association health plans will continue to look to the U.S. Department of Labor for guidance about these plans and about any possible effect of on-going federal litigation on these plans."

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