The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/SB 940
INTRODUCER: Banking and Insurance Committee and Senators Calatayud and Rodriguez
SUBJECT: Multiple-employer Welfare Arrangements
DATE: April 19, 2023 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Johnson Knudson BI Fav/CS
2. Renner McKay CM Favorable
3. Johnson Twogood RC Favorable
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Technical Changes
I. Summary:
CS/SB 940 revises statutory provisions relating to the regulation of association health plans
(AHP), which are a type of multiple employer welfare arrangement (MEWA). A MEWA is a
legal arrangement that allows business associations or employer groups to jointly offer health
insurance and other specified benefits to their members or employees. In Florida, The Office of
Insurance Regulation has regulatory oversight of self-insured MEWAs and AHPs.
In 2018, the U.S. Department of Labor (DOL) revised the Employee Retirement Income Security
Act (ERISA) rules by providing another option for establishing and maintaining an association
health plan in order to expand access to affordable health coverage for sole proprietors and small
employers. This rule loosened the requirements for associations to qualify as ERISA-covered
“bona-fide associations,” thereby allowing the AHPs they sponsor to qualify as single ERISA
plans and be subject to large group market requirements instead of the individual and small
group market requirements. Florida codified the 2018 federal regulation defining “bona-fide
group.” In 2019, the U.S. District Court for the District of Columbia invalidated significant
provisions of the federal regulations. The court concluded that the bona fide association and
working provisions of the Final Rule are unreasonable and unlawful interpretations of ERISA,
and these provisions were vacated by the court.
CS/SB 940 revises the definition of “bona-fide group” under Florida law to include many of the
provisions of the 2018 federal rule and removes the cross reference to the 2018 federal
BILL: CS/SB 940 Page 2
regulation. The bill provides that a bona-fide group is an employee welfare benefit plan
consisting of a group or association of member employers that meets the following requirements:
 The primary purpose of the group or association is to offer and provide health coverage to its
member employers and their employees, but the group or association must have at least one
substantial business purpose that is unrelated to the offering and providing of health
insurance. A substantial business purpose is considered to exist if the group or association
would be a viable entity in the absence of sponsoring an employee benefit plan.
 Each member employer participating in the group health plan is a person acting directly as an
employer of at least one employee who is a participant covered under the plan.
 The group or association has a formal organizational structure with a governing body.
 The functions and activities of the group or association are controlled by its member
employers. The control must be present both in form and substance.
 The member employers have a principal place of business in the same region that does not
exceed the boundaries of a single state or a metropolitan area, even if the metropolitan area
includes more than one state.
 Eligibility for the association or group health coverage offerings is specified, such as an
employee or former employee of a current employer member of the group or association; or a
beneficiary of the current or former employee.
 The group or association is not a health insurance issuer as described in section 733(b)(2) of
ERISA, or owned or controlled by a health insurance issuer or by a subsidiary or affiliate of a
health insurance issuer, other than to the extent such entities participate in the group or
association in their capacity as member employers of the group or association. This language
is substantially similar to language found in 29 C.F.R. part 2510.3-5 (8), with the only
difference being the removal of the federal citation for the definition of a health insurance
issuer.
 The group or association health coverage must comply with the nondiscrimination provisions
of s. 627.6699, F.S., as it applies to small group health plans.
The bill is not expected to have an impact on state or local governments.
The bill takes effect upon becoming law.
II. Present Situation:
Regulation of Multiple Employer Welfare Arrangements under ERISA
The U.S. Department of Labor (DOL) is responsible for the administration and enforcement of
the provisions of Title I of the Employee Retirement Income Security Act (ERISA).1 In general,
ERISA prescribes minimum participation, vesting and funding standards for private-sector
pension benefit plans and reporting and disclosure, claims procedure, bonding and other
requirements which apply to both private-sector pension plans and private-sector welfare benefit
plans. ERISA also prescribes standards of fiduciary conduct which apply to persons responsible
for the administration and management of the assets of employee benefit plans subject to ERISA.
1
29 U.S.C. s. 100 et seq.
BILL: CS/SB 940 Page 3
ERISA covers only those plans, funds, or arrangements that constitute an “employee welfare
benefit plan,” as defined in ERISA Section 3(1), or an “employee pension benefit plan,” as
defined in ERISA Section 3(2). By definition, multiple employer welfare arrangements
(MEWAs) do not provide pension benefits; therefore, only those MEWAs that constitute
“employee welfare benefit plans” are subject to ERISA’s provisions governing employee benefit
plans.
Prior to 1983, if a MEWA was determined to be an ERISA-covered plan, state regulation of the
arrangement would have been precluded by ERISA’s preemption provisions. On the other hand,
if the MEWA was not an ERISA-covered plan, which was generally the case, ERISA’s
preemption provisions did not apply and states were free to regulate the entity in accordance with
applicable state law. In 1983, Congress amended ERISA to give states regulatory authority over
self-insured multiple employer welfare arrangements and some regulatory authority over fully
insured MEWAs to ensure solvency, require state licensure, and require financial reporting.2
Subsequently in 1996, ERISA was amended to give the DOL the authority to require full-insured
and self-insured MEWAs to register with the DOL.3 MEWAs that are not group health plans
(non-plan MEWAs) must register with the DOL prior to operating in a state.4 The purpose of this
reporting was to allow the department to determine whether the requirements of part 7 of ERISA
were being met.5 Part 7 of ERISA includes statutory amendments made by HIPAA and other
statutes for which MEWAs must annually report compliance.
The Patient Protection and Affordable Care Act6 (PPACA) created reporting requirements for
MEWAs, imposed criminal penalties on MEWA fraud, and authorized the department to take
immediate actions against fraudulent MEWAs.
Access to Affordable Health Insurance Coverage through an Association
Prior to August 20, 2018, health insurance coverage offered or provided through an employer
trade association, chamber of commerce, or similar organization, to individuals and small
employers, was generally regulated under the same federal standards that apply to insurance
coverage sold by health insurance issuers7 directly to these individuals and small employers,
unless the coverage sponsored by the group or association constituted a single ERISA covered
plan.8 Generally, unless the arrangement sponsored by the group or association constituted a
single ERISA covered plan, the regulatory framework disregarded the group or association in
determining whether the coverage obtained by any particular participating individual or
2
Pub. L. 97-473.
3
Pub. L. 104-191.
4
Title 29 CFR s. 2520.101-2.
5
65 Fed Reg. 7152 (Feb. 11, 2000) interim rule and 68 Fed. Reg. 17494 (Apr. 9, 2003) final rule.
6
The Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152), which amended and revised several provisions of the PPACA, was enacted on March 30, 2010. The
laws are collectively referred to as PPACA.
7
A “health insurance issuer” or ‘‘issuer’’ is an insurance company, insurance service, or insurance organization (including an
HMO) that is required to be licensed to engage in the business of insurance in a state and that is subject to state law that
regulates insurance (within the meaning of section 514(b)(2) of ERISA). Such term does not include a group health plan.
29 CFR 2590.701–2. The terms ‘‘health insurance issuer’’ and ‘‘issuer’’ are used interchangeably.
8
Fed. Reg. Vol. 83, No 120 (June 21, 2018) at 28912 and 28913.
BILL: CS/SB 940 Page 4
employer is individual, small group, or large group market coverage. Instead, the test for
determining the type of coverage focuses on whether the coverage is offered to individuals or
employers.9
As a result, associations that wanted to form association health plans (AHPs) and existing AHPs
currently faced a complex and costly compliance environment, insofar as the various employer
members of the association and the association’s health insurance coverage arrangement may
simultaneously be subject to large group, small group, and individual market regulation which
undermines one of the core purposes and advantages of an association forming and its employer
members joining an AHP.
On June 21, 2018, the DOL issued its final rule on the regulation of AHPs, effective August 20,
2018.10 The final rule maintains the existing regulatory framework but also creates a second
option for both new and existing AHPs that may elect to follow the new regulations. The second
option contains the following key provisions:
 Allows for AHPs to be based on a common geography area or a common industry for
purposes of the commonality of interest test.
 Allows small employers, including sole proprietors with no employees, to join together to
form an AHP and be treated as a large employer for the purpose of buying insurance.
Previously an employer with no employees was not eligible for group coverage.
 Includes nondiscrimination protections that prohibit associations from conditioning
membership based on a health factor (e.g., health status, medical condition including both
physical and mental illnesses, claims experience, receipt of health care, medical history,
genetic information, evidence of insurability, or disability of an employee, or family
member). An AHP may not discriminate in eligibility (e.g., enrollment, effective coverage
dates, or waiting periods) benefits or premiums against an individual within a group of
similarly situated individuals based on health factors. The rule does not prohibit the use of
non-health factors such as gender, age, geography, and industry. The rule prohibits groups or
associations from treating the employees of different employer members as distinct groups of
similarly situated individuals based on a health factor.
 Eliminates the existing requirement that a group or association acting as an employer must
exist for purposes other than providing health benefits. The rule requires that a group or
association of employers have at least one substantial business purpose unrelated to offering
and providing health coverage or other employee benefits to its employer members and their
employees, even if the primary purpose of the group or association is to offer such coverage
to its members.
The rule provides that states will continue to have regulatory oversight of AHPs and share
enforcement authority with the federal government. The new rule does not affect previously
existing AHPs, which were authorized under prior guidance.11 Such plans can continue to
operate as before, or elect to follow the new requirements if they want to expand within a
geographic area, regardless of industry, or to cover the self-employed. New plans can also form
9
Id. Known as the “look through” doctrine.
10
29 CFR Part 2510, available at https://www.govinfo.gov/content/pkg/FR-2018-06-21/pdf/2018-12992.pdf (last viewed
April 3, 2023).
11
Fed. Reg. Vol. 83, No. 120 (June 21, 2018) Preamble.
BILL: CS/SB 940 Page 5
and elect to follow either the old guidance or the new rules. New and existing plans may use
experience rating by underwriting premiums for individual employer members based on health
status. However, the AHPs that want to do so must continue to meet the prior federal regulations,
which are more stringent standards in areas such as commonality of interest; and they could not
enroll working owners in an AHP coverage.
In the preamble of the rule, the DOL states that the final rule does nothing to remove the
traditional oversight and regulatory authority that states have over AHPs and MEWAs. The final
rule does not modify or otherwise limit existing state authority under Section 514 of ERISA.
For fully insured AHPs, states can impose solvency standards and other rules that apply to health
insurers that sell policies to AHPs. The DOL adds that states clearly have the authority to impose
licensing, registration, certification, financial reporting, examination, audit, and any other
standards on fully insured AHPs that are necessary to ensure compliance with the state solvency
standards. For self-insured AHPs, states can apply insurance laws to the AHP so long as the state
law is “not inconsistent” with ERISA.12
The rule provides that the large group market’s regulatory flexibility is likely to encourage and
enable more existing organizations to pursue more potential scale advantages for small business
members. These might include some MEWAs that currently do not constitute single large group
plans but instead encompass multiple plans, each sponsored separately by a participating
employer (non-plan MEWAs).13 Further, the rule also encourages the establishment of new
organizations to sponsor AHPs, and will enable both existing and new AHPs to extend
membership to working owners. Fully-insured and self-insured AHPs established under this final
rule generally will be subject to federal benefit mandates that apply to the large group insurance
and self-insured ERISA-covered markets, respectively.
Federal Litigation Relating to the Regulations of AHPs
Eleven states and the District of Columbia sued the DOL alleging that its final rule interpreting
the definition of “employer” in ERISA is unlawful under the Administrative Procedure Act.14
The court held that the bona fide association and working owner provisions of the final rule,
codified at 29 C.F.R. ss. 2510.3-5(b), (c), and (e), are unreasonable interpretations of ERISA and
were vacated by the court.15 The court concluded that the final rule was intended to end run the
requirements of PPACA.16 The court notes that the final rule includes a severability provision,
which provides that if a provision is found entirely invalid then “the provision shall be severable
from (the final rule) and shall not affect the remainder thereof.” In light of this provision, the
court remanded the final rule to the agency for consideration in the first instance of how the
12
Section 514(b)(6)(A)(ii) of ERISA. See Health Affairs Blog, Final Rule Rapidly Eases Restrictions on Non-ACA-
Compliant Association Health Plans (June 21, 2018), available at
https://www.healthaffairs.org/do/10.1377/forefront.20180621.671483/full/ (last visited April 3, 2023).
13
Health Affairs Blog, Final Rule Rapidly Eases Restrictions on Non-ACA-Compliant Association Health Plans (June 21,
2018), available at https://www.healthaffairs.org/do/10.1377/forefront.20180621.671483/full/ (last visited April 3, 2023).
14
State of New York, et al., v. United States Department of Labor, 363 F.Supp.3d 109 (D.C. Cir 2019).
15
Id. at 141.
16
Id.
BILL: CS/SB 940