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NCFC-NMPF Comments on Small Business Health Plans (SBHPs)

May 9, 2018

The Honorable R. Alexander Acosta
Department of Labor
200 Constitution Avenue NW
Washington, DC 20210               

Dear Secretary Acosta: On behalf of the more than two million farmers and ranchers who belong to farmer cooperatives, the National Council of Farmer Cooperatives (NCFC) and the National Milk Producers Federation (NMPF) write to echo the comments recently submitted by our mutual member, Land O’Lakes, Inc., to the Office of Regulations and Interpretations, Employee Benefits Security Administration within the Department of Labor in response to the Notice of Proposed Rulemaking to facilitate the formation of Small Business Health Plans (SBHPs).  We understand that the comment period has closed but respectfully ask that our support for the detailed comments provided to the Department by Land O’Lakes, Inc. be noted as you consider options for a final rulemaking. Since 1929, NCFC has been the voice of America’s farmer-owned cooperatives.  NCFC values farmer ownership and control in the production and distribution chain; the economic viability of farmers and the businesses they own; stewardship of natural resources; and vibrant rural communities.  We have an extremely diverse membership, which we view as one of our sources of strength – our members span the country, supply nearly any agricultural input imaginable, provide credit and related financial services (including export financing), and market a wide range of commodities and value added products.  Earnings from these activities are returned to their farmer members on a patronage basis, helping to improve their income from the marketplace.  These earnings are then recycled through rural communities as farmers and ranchers purchase goods and services from local businesses, thereby sustaining rural America. NMPF, established in 1916 and based in Arlington, VA, develops and carries out policies that advance the well-being of dairy producers and the cooperatives they own.  The members of NMPF’s cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of dairy producers on Capitol Hill and with government agencies. Today, thousands of our members (farmers, their families, and their employees) purchase health insurance through their farmer cooperative.  These unique, cooperative-based plans have evolved over the years to provide individual, small and large group farmer purchasers with the buying power of a nationwide pool.  Our farmers trust their cooperatives to work in their best interest in providing quality products and services.  Cooperative insurance programs have earned that trust by providing valuable benefits at reasonable prices with exceptional customer service over a long period of time. Our combined membership supports the Department’s decision to allow working owners – which includes working owner-farmers – to participate in group health plan coverage through an SBHP.  Doing so expands access to affordable and quality health care options for working owner-farmers, allowing them the freedom to choose a health plan that best fits their needs.  If working owners are permitted to participate in an SBHP, as proposed by the Department, plans such as the one established by Land O’Lakes, Inc. would be able to expand self-insured health plan coverage to working owner-farmers across the country.  We urge the Department to finalize this proposal. Additionally, our organizations support the proposed modification to the “commonality of interest” test, which would eliminate the geographical limitation for employers and working owners “related” by a common industry.  The new SBHP also could offer coverage to additional agricultural workers and working owner-farmers because those individuals would, as participating employer and working owner-farmer cooperative members, clearly be “related,” thereby satisfying the proposed “commonality of interest” requirement.  With no geographical constraint, the new SBHP could offer health cover to employees and working owner-farmers in all 50 states, or on a regional basis.  Doing so would allow for greater plan participation as well as improved financial security and reduced administrative costs. We also support the development of a “class exemption” that would exempt a self-insured SBHP from the non-solvency requirements of State “multiple employer welfare arrangement” (MEWA) laws.  A self-insured SBHP is by definition a MEWA.  The Employee Retirement Income Security Act (ERISA) gives states the exclusive authority to impose any state insurance law requirement on self-insured MEWAs.  As such, states have enacted their own state MEWA laws with varying degrees of regulation while others prohibit self-insured MEWAs entirely.  This has created a “patchwork” of requirements that a self-insured SBHP must meet if a member-run organization (such as a farmer-owned cooperative) wants to offer self-insured health coverage to employees and working owners located in multiple states. A self-insured, multi-state SBHP would, in those states that permit it at all, have to satisfy the most stringent coverage and financial requirements of any of the states in which it offers coverage.  Unfortunately, the multiplicity of state insurance laws may preclude establishing a single self-insured SBHP.  While it would not be impossible for an SBHP to comply with the most stringent state solvency requirements, the cost and time associated with complying with the patchwork of other regulations and licensing rules will be prohibitive.  For this reason, we support the recommendation that the Department to issue a class exemption, safeguarding a self-insured SBHP from the non-solvency requirements of state MEWAs, provided specified Federal requirements are satisfied. A principal purpose of ERISA was to avoid the multiplicity of state regulations and permit nationally uniform administration of employee benefit plans.  A class exemption would provide a level of uniformity that would allow self-insured SBHPs to offer health coverage in multiple states without the burden of complying with regulations that differ in each-state.  Such uniformity can be accomplished through a class exemption conditioned on satisfying specific requirements.  We encourage the Department to preclude a state from imposing prohibitive reserve requirements as a of preventing all self-insured SHBPs from operating within the state.  We believe that such state action would be inconsistent with ERISA. Finally, we urge the Department to modify the proposal, allowing a self-insured SBHP to develop different premiums for different group members based on the member group’s “health claims experience,” with special consideration given to experience-rating very small groups and working owners.  Experience-rating premiums for different employer and working owner-groups is done for the benefit of plan participants.  Without this option, the solvency of the SBHP might be called into question and undermine the health coverage offered to plan participants.  We agree that some level of experience-rating to ensure the affordability and quality of health coverage made available.  We support the recommendations to limit experience-rating to avoid prohibited health status factor discrimination included in the comments submitted by Land O’Lakes, Inc. To close, farmer cooperatives have been innovative and pioneering in their efforts to bring quality health insurance to their farmer members.  We urge the Department to advance proposals that build on the quality health care currently provided in rural America by agricultural cooperatives. Thank you for your consideration of our comments. Sincerely,

Charles F. Conner
President & CEO
National Council of Farmer Cooperatives

Jim Mulhern
President & CEO
National Milk Producers Federation

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