Judge Strikes Down Association Health Plan Rule

By now you have probably seen or heard the news that the new rules governing association health plans (AHPs) have been struck down. Although true, this is not yet in effect. The judge in this case has remanded the final rule back to the DOL to consider whether two specific provisions of the rule can be severed from the rest of the regulations. The remainder of the rule is still valid.

Background

The final rule governing AHPs was created by the Department of Labor (DOL) to comply with an executive order issued by President Trump in October 2017. As directed by the executive order, the DOL was tasked with issuing regulations that would permit more employers (as well as sole proprietors) to form AHPs, thus expanding access to more affordable, high-quality health coverage. The DOL was specifically instructed to consider expanding the conditions that must be satisfied to form an AHP that is treated as a single plan under the Employee Retirement Income Security Act (ERISA).
The final rule allows AHPs to offer coverage to some or all employers in a state, city, county or multi-state metro area, or to businesses in a common trade, industry, line of business or profession in any area, including nationwide. In addition, the final rule allows working owners without other employees, such as sole proprietors and other self-employed individuals, to join AHPs.

So, What Happened?

On Thursday, March 28, U.S. District Judge John Bates struck down the Trump administration’s new regulations governing AHPs stating they are “clearly an end-run around the ACA.” Specifically, the court struck down two parts of the final rule:

• The provision allowing any association of disparate employers to be considered a “bona fide group,” and
• The provision allowing working owners, without employees, to become members of an association.

The lawsuit against the DOL was brought by eleven states and the District of Columbia, which contend the final rule was intended to “end run” the requirements of the ACA, and that the bona fide association and working owner provisions of the rule are “unreasonable interpretations of ERISA.”

What Does This Mean?

This ruling does not impact associations comprised of related employers, those in the same industry, as they will continue to be considered a “bona fide group” for AHP purposes. However, unrelated employers and business owners, without employees, that have already joined an AHP or are considering it, should review how they may be affected if this ruling stands.
AssuredPartners will be closely monitoring all developments related to this ruling and will communicate any new information as soon as it is known.
Should you have any questions or concerns, please contact your AP Benefit Advisors’ Account Executive or Account Manager.
Links:
State of New York v. U.S. Department of Labor