How do thousands of business people in Oregon get away with coverage that doesn't include the essential benefits required in such policies?

First, the researchers do a bit of throat-clearing to set the stage.

"With the passage of [PPACA], health insurance sold through an association to individuals and small employers must meet the same insurance standards of coverage sold in the individual and small-group market. There are, however, rare instances in which an association selling health insurance meets criteria under the Employee Retirement Income Security Act and is referred to as an 'ERISA bona fide group or association of employers.'  In this limited circumstance, the health insurance is treated as a single large-group health plan under ERISA and is not required to meet the [PPACA] protections for small-group markets," the report said.

"Given that [PPACA] now imposes certain rating and benefit standards and rate review requirements (among others) for the small-group market that are not imposed on the large-group market, an association consisting of small employers has a significant incentive to claim its health coverage as a single large-group health plan under ERISA and be regulated as such under federal law."

In Oregon, where brokers and small businesses are both very familiar with AHPs, the will existed to find a way to claim the loophole. First, someone had to be willing to look the other way. That someone was the state insurance department. Let's let the researchers fill in a bit more of the story.

"State regulators indicated that the authority to determine whether or not health coverage through an association qualified for ERISA large-group coverage rests with the U.S. Department of Labor, and because it did not have the authority to make such a  determination, doubted that any state decision would  'carry any weight' in this area."

What the department did was to offload to the feds the job of determining whether the Oregon ADPs should be able to claim ERISA status. The department, in so doing, washed its hand of the decision and thus created the opportunity the AHP members needed. The hand-washing was a good one, because the state said it would not require the plan members to actually produce anything saying the DOL had signed off on the deal.

Turns out other states with a strong AHP presence don't take that approach. Here's what the researchers found out.

"Respondents indicated that Oregon's approach contrasts with the approach of other  states, such as Nevada and Montana, which require a determination from the Department of Labor that the association meets 'ERISA bona fide' status before an issuer can provide a large-group policy to an association."

Oregon does require insurers to avow that their covered members do meet the ERISA standard. Welcome to another loophole. Basically, all the insurers need to do is check of the box that says "We asked 'em and they said they did." The researchers put it this way:

"Most insurers have simply asked the association to produce a legal opinion that it meets the criteria for 'ERISA bona fide' status, allowing the insurer to provide a single large- group health plan."

Were the businesses really trying to skirt the PPACA mandates, or did they really just like their brokers so much they couldn't bring themselves to change plans to comply? Here's what the researchers were told by numerous parties in Oregon they interviewed on this issue, including those with the coverage:

"Many respondents noted that part of the motivation for associations to seek health coverage as a large-group under ERISA is to avoid the small-group market reforms required under the ACA, specifically the rating reforms and essential health benefits requirements."

And did they, in fact, get preferred rates from their insurance companies? Here's what the researchers found:

"Insurers noted that they consider the specific claims experiences of a small employer member group in setting rates at renewal. This practice is not permissible under the rating rules of the ACA for the small-group market, and because large-group rates are not subject to rate review or approval under Oregon law, the accompanying rates are not reviewed or approved by state regulators."

Will more businesses in Oregon attempt to exploit this loophole?

"When asked about the future of AHPs in Oregon," the report said, "industry respondents agreed they would likely continue given that associations could attest to meeting 'ERISA bona fide' status and obtain single large-group coverage. Respondents, however, projected different amounts of growth."

The researchers expressed great concern about this trend in Oregon, partly because it will likely serve as a beacon for those in other states, and partly because those with the insurance aren't getting the great coverage envisioned by the Obama administration. This was their advice for addressing this legal conundrum:

"The exemption for policies under an association claiming 'ERISA bona fide' status and the lack of upfront regulatory oversight at the state and federal level has created the potential for adverse selection in the remaining small-group market in Oregon. If the AHP market expands in future years, there is the possibility of increased market segmentation by health status relative to the more unified market conceptualized by federal law designers. To avoid the long-term consequences of this scenario, states may be looking to the U.S. Department of Labor for a collaborative, streamlined process to more readily assess whether or not associations claiming 'ERISA bona fide' status actually meet standards under federal law that allow them to be treated as a single large-group plan thus avoiding the [PPACA] requirements for the small-group market."

So much for health insurance reform in the progressive state of Oregon.