Association Health Plans in California

Can a trade association, CPA association, real estate association, or chamber of commerce offer health insurance in California?

• Sometimes, but not in the simple “join an association and escape California small-group health insurance rules” way that many employers hoped for a few years ago. If you are a California small employer looking for group health coverage, start by
  • comparing regular small business health insurance quotes,
  • then review whether an association plan,
  • ICHRA,
  • QSEHRA, or
  • level-funded plan makes sense.

What is an Association Health Plan?

An Association Health Plan, often called an AHP, is health coverage offered through a group or association of employers. Many AHPs are also treated as Multiple Employer Welfare Arrangements, or MEWAs, which can be regulated by both federal law and state insurance law.

What happened to the Trump Association Health Plan rule?

In 2018, the U.S. Department of Labor issued a rule that would have made it easier for some employers and self-employed people to join together through Association Health Plans. That rule was later challenged in court, and the Department of Labor officially rescinded the 2018 Association Health Plan rule in 2024. The current federal position is largely a return to the pre-2018 rules for determining when an association can be treated as an “employer” under ERISA.

What did California do?

California responded to the federal AHP expansion by passing SB 1375. California’s position was that many association arrangements should not be used to avoid California’s individual and small-group health insurance protections. The California Department of Managed Health Care also issued All Plan Letter 19-024 on Association Health Plans, explaining how California would treat association coverage after SB 1375.

So why do I still see some association plans?

You may still see health coverage connected with professional associations, chambers of commerce, CPA groups, real estate groups, trade associations, or employer groups. Some may be fully insured arrangements. Some may involve a MEWA. Some may be limited to particular industries or employer types. The key point is that each arrangement has to be reviewed under the applicable California insurance rules, federal ERISA rules, and MEWA filing requirements. California even has a MEWA registration form through the California Department of Insurance.

Is an association plan usually the best choice for a California small employer?

Usually, the first comparison should be a regular California small-group health insurance proposal. California small-group plans are guaranteed issue and are available through major carriers. You can also review the small business health insurance companies and carriers available in California.

If the concern is participation or employer contribution, review California participation and contribution rules. If the concern is reimbursing employees tax-free, review Section 105 reimbursement plans, including ICHRA, QSEHRA, and reimbursing individual health insurance premiums.

If the employer is looking for lower premiums and is willing to consider more risk, a level-funded health plan may be worth reviewing. If the question is whether the business can deduct or pay for health insurance, review Section 106 employer health insurance deductions.

Practical answer

If someone says, “Our association has a group health plan,” do not assume it is illegal, but also do not assume it is automatically better or exempt from California rules. Ask for the carrier name, plan documents, rate sheet, eligibility rules, employer contribution rules, participation rules, and whether the arrangement is a MEWA. Then compare it against regular California small-group health insurance quotes.

Questions to ask before joining an association health plan

1. Is this plan fully insured or self-funded?
A fully insured plan is backed by an insurance company. A self-funded or MEWA-style arrangement may involve different risks and filing rules.

2. Is the plan regulated by the California Department of Insurance or the California Department of Managed Health Care?
California plans may fall under CDI or DMHC jurisdiction depending on the type of coverage.

3. Does the plan comply with California small-group rules?
California law generally does not allow an association to be used simply to avoid small-group protections.

4. Are the rates medically underwritten?
Be careful if the plan appears to separate healthier groups from less healthy groups. One of the major concerns with old association arrangements was risk segmentation.

5. What happens if the association plan terminates?
Ask whether employees will have a special enrollment right into another group plan or individual coverage.

Historical background

This page originally discussed President Trump’s executive order and the 2018 Department of Labor Association Health Plan rule. That history still matters because many employers, associations, and professional groups remember that period and still ask whether association plans are available. However, the more important question today is not “What did the 2018 rule say?” The better question is: “What health insurance options are actually available and compliant for a California employer now?”

Helpful official references

U.S. Department of Labor: Rescission of 2018 Association Health Plan Rule
U.S. Department of Labor News Release on AHP Rule Rescission
Federal Register: 2024 AHP Rule Rescission
DOL: MEWAs Under ERISA Guide
California SB 1375
DMHC All Plan Letter 19-024: Association Health Plans
California Department of Insurance MEWA Registration Form

Need help comparing options?

I am a California health insurance agent. If you are comparing an association health plan against a regular California small-group plan, I can help you compare the practical issues: rates, carrier, provider networks, participation rules, employer contribution, tax treatment, and whether there may be a better structure.

California Law  SB 1375 Hernandez prohibits?
(must comply with ACA protections)
Association Health Plans  AHP

NO MEWA’s, AHP’s, VEBA’s or group coverage to individuals!