The Association Health Plans Act amends the Employee Retirement Income Security Act of 1974 (ERISA) to provide a clearer definition for when a group or association of employers can be treated as a single employer for the purpose of offering health plans. This aims to expand access to health coverage options for small businesses and self-employed individuals.

To qualify, an association health plan must meet several conditions, including having been actively in existence for at least two years, providing coverage to at least 51 aggregated employees, and being formed in good faith for purposes other than solely providing medical care. The bill also specifies that such plans cannot condition membership or coverage on health status-related factors and must make coverage available to all employer members.

Significantly, the legislation allows self-employed individuals to be treated as both employers and employees within these associations, subject to specific eligibility and monitoring requirements. All employees, including self-employed individuals, from participating employer members are aggregated and counted together as a single plan.

Regarding premium rates, the bill permits association health plans to use an actuarially sound, modified community rating methodology that pools all participant claims. It also allows for the adjustment of contribution rates for individual employer members based on their specific risk profiles, provided it is not prohibited by State law. However, groups composed solely of self-employed individuals must treat all members as a single risk pool and charge the same premium rate.

Crucially, the bill mandates that these plans adhere to existing consumer protections, prohibiting discrimination in eligibility or premiums based on health status-related factors. It also explicitly forbids denying coverage due to pre-existing conditions, aligning with current ERISA and Public Health Service Act requirements.