On June 21, 2018, the U.S. Department of Labor (“DOL”) issued final regulations that expanded the availability of association health plans ("AHPs"). Those regulations (the "AHP Rules") were summarized in our previous blog article. An AHP is an arrangement that allows small businesses to band together to obtain healthcare coverage as if they were a single large employer.
An AHP that is properly structured will avoid many requirements that apply to the individual and small group insurance markets under the Affordable Care Act ("ACA"), such as essential health benefits, single risk pools, restrictions on risk underwriting, and medical loss ratio provisions.
On March 28, 2019, a federal district court judge vacated the new AHP Rules. The opinion notes that the AHP Rules constituted "an end run around the ACA," by unreasonably expanding the definition of "employer" under the Employee Retirement Income Security Act of 1974 ("ERISA"). The DOL filed a notice of appeal on April 26, 2019.
The DOL recently issued guidance in light of the court's ruling. The guidance indicates that employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term. After the current year ends, however, coverage must comply with applicable requirements based on the employer’s size (such as the essential health benefits requirement for small employers).
The DOL states that it will not take enforcement action for potential violations relating to actions taken before the court’s ruling, as long as parties meet their responsibilities to provide coverage as promised. Additionally, the DOL will not take action against existing AHPs for continuing to provide coverage through the end of the applicable plan or contract year. The guidance indicates that the Department of Health and Human Services ("HHS") will also follow a similar non-enforcement policy through the end of the applicable plan or contract year.
On May 13, 2019, the DOL issued further guidance in the form of frequently asked questions ("FAQs") to clarify the scope of the enforcement relief described in its earlier statement. The DOL clarifies that AHPs formed under the DOL's pre-existing sub-regulatory guidance (sometimes referred to as “Pathway 1 AHPs”) are unaffected by the district court’s decision. The guidance also provides that AHPs formed under the new AHP Rules (sometimes referred to as “Pathway 2 AHPs”) may not market to or sign up new employer members, but existing employer members can continue to enroll new employees upon special enrollment events and consistent with the plan’s eligibility terms. The DOL further clarifies that its enforcement relief extends through the remainder of the applicable plan year or, if longer, the contract term that was in force at the time of the district court’s decision.