In October 2017, President Trump signed an executive order that included a directive to the Department of Labor (DOL) to expand Association Health Plans (AHPs). AHPs are health plans that are offered to employer groups and professional associations in an effort to provide more coverage for small businesses. The DOL published a final rule governing AHPs in June 2018, expanding access to AHPs to small and single-person businesses.
State of New York v. United States Department of Labor
This past March, the District Court for the District of Columbia issued a ruling in State of New York arguing that the final rule is unlawful and does not comply with the Affordable Care Act (ACA). Specifically, the court found that the DOL’s use of the word “employer” in the final rule created an end-run around the ACA and is at odds with requirements laid out in ERISA governing employee benefit plans.
More specifically, the final rule is not compliant with the ACA because Congress explicitly considered, and then rejected, the idea of adding AHPs as part of the ACA. The ACA was designed to distinguish between small plans for individuals and small businesses and large, employer-sponsored health plans. Historically, smaller plans failed to offer certain benefits or charged significantly higher premiums. ACA plans were designed to make it easier for individuals to find and purchase a plan and be assured their needs were met. The AHP plans seem to stretch the boundaries of what is considered an “employer” beyond ERISA, offering plan participants, including self-employed individuals, options that are neither ACA or ERISA compliant.
The DOL, in consultation with the Department of Justice, has decided to appeal this decision, though at this point it is unknown whether the District Court will stay its decision pending the appeal. The DOL has indicated that it will not go after plan participants and plans that set up and relied on the final ruling in good faith. Businesses that already use AHPs for their team will continue to be able to access their plan and benefits for the duration of the plan contract. Depending upon how the litigation proceeds, businesses may discover their AHPs change in the future to reflect the current legal landscape.
Practical Impacts for AHPs
This situation is still in development, so it’s hard to say at this point what the impacts for AHPs will be. Should the DOL decide to appeal the case, and the district court grant a stay, then the regulations issued in June 2018 will remain in effect until there is a final ruling.