On Thursday, March 28, 2019, a D.C. federal court issued an opinion striking down a new U.S. Department of Labor (DOL) rule that would have expanded the availability of association health plans (AHPs) to small businesses and individuals who are self-employed.
AHPs are group health plans that have historically been available to associations of employers, such as industry groups. Some AHPs may qualify as a single employer benefit plan under federal law (the Employee Retirement Income Security Act, or ERISA). This designation exempts AHPs from Affordable Care Act (ACA) and other federal and state requirements that apply to the individual and small-group insurance markets, an example being essential health benefit coverage requirements. The AHP rule was part of an effort by the current administration to provide alternatives to individual health insurance plans purchased through the ACA health insurance marketplaces and was a companion to a rule regarding short-term plans that expanded their duration to 12 months with extensions up to 3 years.
The court found that the stretching of the definition of “employer” in the DOL rule would have permitted “virtually any association of disparate employers connected by geographic proximity” to qualify as a single plan, thus permitting them to avoid some of the more stringent consumer protection provisions in ACA. The DOL’s definition of “employer” would have even allowed AHPs to enroll self-employed individuals as employers without employees. In ruling the DOL’s interpretation unreasonable, the court found that the rule “was intended and designed to end run the requirements of the ACA,” and did so by “ignoring the language and purpose of both ERISA and the ACA.”
Some AHPs are already being marketed, and other large insurers had planned additional offerings. The DOL estimated that approximately 4 million additional people — of whom 90 percent would be disenrolling from other coverage — would enroll in AHPs following implementation of the rule.