Last year, the Department of Labor (DOL) issued new regulations pertaining to Association Health Plans (AHPs). The rules relaxed previously issued regulations by allowing AHPs to be established for employers who are in the same industry or geographic location. AHPs are regulated like large group health plans which are exempt from some of the Affordable Care Act (ACA) market reforms, including the requirement to cover essential health benefits. The Trump administration said the new AHP rules would expand access to affordable health coverage, especially for employees of small employers and certain self-employed individuals.
A group of states led by New York sued the DOL after the new regulations were issued, citing it was impermissible for the DOL to change the eligibility requirements for establishing an AHP under the Employee Retirement Income Security Act of 1974 (ERISA). Under the ERISA law, an AHP can be established when three requirements are met:
On March 28, 2019, a federal judge in a District Court struck down the new AHP rules. The court had a particular concern with AHPs based on geographic location. The court used an example of different businesses in cities, towns and agricultural regions of California, and indicated the businesses would likely lack the commonality of interest required by ERISA. The court was also concerned with the expanded definition of working business owners who could participate in an AHP, indicating the new definition conflicts with the text and purpose of ERISA. The expanded definition would allow business owners with no employees to join an AHP. The court pointed out that if the expanded definition were permitted, 51 unrelated business owners, each with no employees, could band together to form an AHP that would exempt them from the ACA’s individual and small group requirements.
The Trump administration has indicated that they disagree with the judge’s ruling. In an FAQ document, the DOL has indicated they are considering all options, including the potential of appealing the District Court’s decision and the possibility of requesting that the District Court stay its decision pending an appeal (this would allow the AHP rules to remain in effect during the appeal process).
The FAQ also addresses AHPs that have already been established and that are in operation. The FAQ says, “Participants in AHPs affected by the District Court’s decision have a right to benefits as provided by the plan or policy. Plans and health insurance issuers must keep their promises in accordance with the policies and pay valid claims. Your AHP may change its structure or operations going forward. Your AHP’s plan administrator is the best resource for information about changes that the AHP may make in the future.”
This is a fluid situation with more guidance and information expected to come down the road. Stay tuned.