The U.S. Department of Labor (DOL) this week proposed a rule that would reverse a regulation put forward during the Trump administration designed to expand the formation and use of association health plans (AHPs), which are group health plans covering small employers and self-employed individuals in the same or different industries.
The 2018 rule had previously been struck down by a federal judge in 2019, and the 2018 rule was never fully implemented.
The 2018 rule expanded the definition of association health plan in a way that would have allowed some individual and small group health insurance coverage to be treated as large group coverage and "evade critical consumer protections under the Affordable Care Act, which requires coverage of essential health benefits such as emergency and maternity and newborn care," the DOL said in a news release Dec. 19. Specifically, the rule "established an alternative set of criteria for determining when a group or association of employers is acting 'indirectly in the interest of an employer' under section 3(5) of the Employee Retirement Income Security Act (ERISA) for purposes of establishing an association health plan as a multiple employer group health plan, allowing the AHP to evade ACA consumer protections."
"The Department of Labor now believes that the provisions of the 2018 Association Health Plan Rule that the district court set aside as inconsistent with the Administrative Procedure Act and in excess of the department's authority are, at a minimum, not consistent with the best reading of the statutory requirements governing group health plans," said Assistant Secretary for Employee Benefits Security Lisa M. Gomez.
The DOL said it is proposing to rescind the 2018 rule in full "to resolve any uncertainty regarding the status of the standards established under the rule, allow for a reexamination of the criteria for a group or association of employers to be able to sponsor an AHP, and ensure that guidance being provided to the regulated community is in alignment with ERISA's text, purposes and policies."
The proposed rule will have a 60-day period for public comments.
SHRM Online gathered additional news on the topic.
Background on AHPs
AHPs, which are governed by state and federal laws, have historically varied significantly in size and membership. Some are formed to offer health insurance to individuals, while others serve small or large employers. AHPs can also serve a mix of individuals and employers. AHPs that offer benefits to employers generally qualify as multiple employer welfare arrangements (MEWA) under ERISA. MEWAs, particularly those that are self-insured, have a history of insolvency and sometimes even fraud.
Small Businesses See Benefits of AHPs
Proponents of AHPs say they can give small businesses and self-employed business owners the same benefits of better bargaining for lower prices and better coverage that large employers have. A 2019 Congressional Budget Office analysis of the 2018 AHP rule estimated that premiums for AHPs would be about 30 percent lower than premiums for fully regulated small group coverage. Thirty-seven states allow AHPs to operate.
Federal Judge Blocked Expanded Access to AHPs in 2019
In March 2019, in State of New York v. U.S. Department of Labor, District Judge John Bates of the District Court in Washington, D.C., ruled that the DOL's 2018 final rule stretched the definition of "employer"—as the entity that can sponsor an employee benefits plan—beyond what the Employee Retirement Income Security Act (ERISA) would bear. He characterized the rule as "clearly an end run around the ACA," designed to let employers "avoid the most stringent requirements of the ACA."
Ten states and Washington, D.C., had challenged the AHP rule, saying it let employers evade the ACA's consumer protections.
"This victory will help ensure better health care for millions nationwide," said New York Attorney General Letitia James.
Business groups, however, welcomed the rule. Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, for instance, called its enactment "a major step in the right direction for small businesses and the millions of Americans who will now be able to buy lower-cost health insurance plans." And SHRM joined an amicus brief in support of the AHP rule, which argued that the rule "promotes economies of scale and administrative efficiency for small businesses" that are seeking to offer health care coverage to their employees.
In April 2019, shortly after the ruling, the DOL announced that it will not enforce violations stemming from good-faith reliance on the AHP rule's validity, as long as businesses in an AHP meet their responsibilities to pay health benefit claims as promised.