The interplay between the Affordable Care Act (“ACA”) legislation/interpreting regulations and existing state insurance laws continues to evolve.  To further complicate matters, the regulators’ own positions on certain state insurance law issues have themselves changed over time.  For example, some state insurance laws permit insurers to require small groups to maintain certain threshold participation or contribution levels, and employers preparing to implement the ACA have wondered whether they will need to continue meeting those thresholds.

Proposed regulations issued by the US Department of Health and Human Services (“HHS”) in the fall of 2012 would have allowed insurance companies to continue to impose “minimum participation” and/or “minimum contribution” requirements where permitted under applicable state law, and to refuse to issue a group policy to an employer plan sponsor if these requirements were not satisfied.

This approach would have caused obvious problems to an employer that was large enough to be an “applicable large employer” under the ACA, but not large enough to be self-insured.  Such an employer would be in a difficult position in 2014, with (potentially) few options for actually securing a group health plan, while facing the resulting penalties for failing to offer coverage to all full-time employees.

In the final HHS regulations that were published in the Federal Register on February 27, 2013, HHS announced the opposite approach.  Under the final regulations, insurance companies will be required to issue group policies without regard to state law “minimum participation” and/or “minimum contribution” requirements, although some conditions and timing restrictions will apply.