A Solution to Rising Health Care Costs

Government Relations

The structure and experience of the franchise model makes it uniquely suited to implement and manage quality Association Health Plans.

By Suzanne Beall, Esq.

While employer-sponsored coverage remains the most common source of healthcare coverage in the United States, a smaller proportion of people are covered by employers than a decade ago. In fact, recent studies have shown that 36 percent of small employers with less than 10 employees have dropped coverage altogether during the period between 2008 and 2015. This is because insurance companies charge higher rates for smaller risk pools. Small group market rules under the Affordable Care Act make it more difficult for small businesses to provide affordable health insurance without the purchasing power of a large group. A new proposed regulation by the U.S. Department of Labor can mitigate these trends, especially if DOL looks to the franchise business model as a tool for increased access to affordable care.

The franchising model is perhaps the best example of how economies of scale can be utilized to make the delivery of products and services more affordable for small business owners, the independent, local franchisees, and those businesses’ customers. For example, franchisors currently use their bargaining power to negotiate and efficiently distribute products in the manufacturing and agriculture industries throughout their systems. If the benefits of economies of scale can be translated to the purchase of health insurance, franchise systems will be able to improve access to coverage at an excelled rate.

“If the benefits of economies of scale can be translated to the purchase of health insurance, franchise systems will be able to improve access to coverage at an excelled rate.”

Last October, members of IFA’s Board of Directors, including IFA Immediate Past Chair Shelly Sun, CFE, of BrightStar Care, First Vice Chair David Barr of PMTD Restaurants and Second Vice Chair Catherine Monson, CFE, with FASTSIGNS International — witnessed first-hand U.S. President Trump’s signing of an Executive Order that eases rules to allow small businesses to band together and create Association Health Plans that could form across state lines. Subsequently, on March 6, IFA submitted comments to DOL in support of the proposal and urged DOL to expand the definition “employer” under the Employee Retirement Income Security Act of 1974 to allow for those employers with a “commonality of interest” through the franchising business model to be included in the final rule. IFA shared with DOL that the structure and experience of the franchise model makes it uniquely suited to implement and manage quality AHPs. Franchises can effectively utilize AHPs through their intra-band structures, vertical distribution models, and regionally among multiple small business brands or through the IFA to maximize the impact of the regulation.

“IFA will continue to be at the forefront of engaging with the
administration and stakeholders on these important issues.”

Notably, IFA also urged DOL to adopt a safe harbor provision in the final regulation clarifying that the establishment and participation in an AHP does not create or imply joint employer liability. As the franchising community knows well, federal and state employment laws have traditionally found that a joint employer is one who exerts direct and immediate control over essential employment terms of another entities’ employees. The tests used to determine joint employment status have increasingly become vague, even allowing for the analysis to be made based on factors that make “indirect” or “unexercised reserved control” be determinative. For these reasons, IFA pressed DOL to include a safe harbor in order to prevent joint employment liability to arise out of the creation of an AHP, whether vertically within a brand or managed by IFA. Without a safe harbor, IFA and franchised businesses will be reluctant to consider offering an AHP, impeding the success of the rulemaking.

DOL is currently reviewing the comments received on the proposed rule, and IFA will continue to be at the forefront of engaging with the Administration and stakeholders on these important issues.

Suzanne Beall, Esq., is Vice President of Government Relations & Public Policy for the International Franchise Association. Find out more and get involved with IFA’s Franchise Action Network at www.franchise.org/fan.

Advertisement