DOL Appeals Association Health Plan Ruling

The Department of Labor works to overturn a district court decision that struck down a 2018 regulation

Stephen Miller, CEBS By Stephen Miller, CEBS May 1, 2019
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If you are a small employer with an association health plan (AHP) and you're worried about last month's court decision that invalidated the Department of Labor rule easing access to such plans, fear not, at least for now.

The DOL, which is appealing the federal district court decision striking down its 2018 AHP regulation, announced on April 29 that it will not pursue violations stemming from employers' 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. Nor will the DOL take action against existing AHPs for continuing to provide benefits to members who enrolled before the district court's order, through the remainder of the applicable plan year or contract term. 

[Update: On May 13, the DOL issued a new set of frequently asked questions addressing the district court ruling.]

AHPs are multiemployer health plans that allow small businesses that could previously only purchase group coverage in their state's small group market to join together through an association and purchase insurance in the less-regulated large group market. Under the DOL rule, employers in an AHP do not need to be in the same industry or share a common location. 

SHRM Online has selected the following articles to provide a deeper look into this topic.

What Happens Now

Unless the government seeks—which it has yet to do—and is granted a stay of the judge's order, "plans formed under the vacated sections of the rule are illegal," said Timothy Jost, an emeritus health law professor from Washington and Lee University. Still, that won't mean anything for existing plans if the states or federal regulators choose not to enforce the ruling, Jost said. And that could cause more confusion in the marketplace.
(Kaiser Health News via Herald-Mail Media)

What Happens Next

The next step will be for the Department of Labor and individual states to file legal briefs with the Court of Appeals for the D.C. Circuit, wrote attorneys at law firm Kilpatrick Townsend & Stockton. Once that is finished, a hearing before the Court of Appeals will be scheduled.
(JD Supra)

Appeal Welcomed by AHP Advocates

"This appeal is welcomed by associations across the country who have invested their time, money and reputation to launch health plans under the 2018 regulation," said Kev Coleman, president of AssociationHealthPlans.com, an online resource for AHPs. "The new regulation made it easier for small businesses and sole proprietors to band together and access the lower-cost large company health insurance market that already provides coverage to roughly 96 million Americans. At the same time, this regulation included important protections regarding pre-existing condition coverage anti-fraud measures, and nondiscrimination requirements."
(AssociationHealthPlans.com)

[SHRM members-only toolkit: Managing Health Care Costs] 

Limits on Renewing Coverage

Insurers may no longer renew AHP coverage for an employer member under the final rule unless that coverage complies with the market requirements for that employer’s size. This means that coverage sold to a sole proprietor would need to comply with the individual market rules, and coverage sold to a small employer would need to comply with the small group market rules. Insurers can satisfy their guaranteed renewability requirements by continuing coverage either through the association or through separate contracts with each employer member outside of the association.

Employers and individuals who already enrolled in an AHP under the final rule can maintain their coverage until the end of their plan year or contract term. The DOL will work with affected parties, other departments, and the states to mitigate disruption because of the litigation.
(Health Affairs)

Rule Struck Down in March

In State of New York v. U.S. Department of Labor, District Judge John Bates of the District Court in Washington, D.C., held 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  would bear. He characterized the rule as "clearly an end run around the ACA [Affordable Care Act]," designed to let employers "avoid the most stringent requirements of the ACA."

Business groups, however, had welcomed the DOL's rule. Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, 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."
(SHRM Online)


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