In a recent blog, we discussed the court’s ruling regarding Association Health Plans (AHPs). In the month following the court’s ruling on AHPs, the Department of Labor (DOL) decided to appeal the court’s decision and filed a notice of intent to appeal the March ruling that they exceeded their statutory authority based on ERISA. The court also found that the DOL rule that defines “employer” to include associations of tenuously related employers, including working owners without employees, was overly broad.
The AHP Final Rule was issued in June 2018 in an attempt to provide regulations to allow small businesses to band together to access health insurance plans not otherwise available to small employers and self-employed individuals. Working together allowed small businesses to reduce administrative costs, increase their negotiating power with plan providers, and access better healthcare networks.
The District of Columbia and eleven other states including California, Delaware, Kentucky, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Virginia, and Washington filed a lawsuit challenging the AHP Final Rule. The court sided with the states, agreeing that the Final Rule was overly broad and exceeded the DOL’s authority. While the case is being appealed, Senators are introducing legislation designed to keep allowing access to AHPs and allow the affected businesses to continue to access AHPs in compliance with the DOL’s current rule.
Enforcing the District Court’s Decision?
On April 29, the DOL also announced that it would not take enforcement actions against plans and businesses following the current court decision, so long as the businesses’ actions rely in good faith on the AHP Final Rule. As always, businesses and plan administrators must strive to meet their fiduciary responsibilities to association members, plan participants, and other beneficiaries to pay health claims as promised. Member businesses that enrolled in an AHP in good faith will continue to receive the services they contracted for without action from the DOL for either the remainder of the plan year or the term of the contract that was in force at the time of the court’s decision. This implies that businesses who had not taken advantages of the Final Rule at the time of the district court’s decision are now barred from accessing AHPs until new legislation passes or the ruling of the district court is overturned on appeal.