The courts have complicated the efforts of President Donald Trump's administration to allow small businesses to pursue more affordable healthcare coverage options. A federal judge in the District of Columbia recently found that portions of the Department of Labor's 2018 final rule on association health plans were invalid and constituted an "end-run" around the Affordable Care Act that exceeded the DOL's authority under the Employee Retirement Income Security Act of 1974.
The Department of Justice has until May 28 to file a notice of appeal, meaning the ultimate fate of the final rule could still be altered. For many employers, this should prompt an examination of how their plans could be affected by the court's ruling, and a close monitoring of any further developments or changes the DOL may make to the rule.
Judge determines final rule an effort to avoid ACA's most stringent requirements
In October 2017, following failed congressional efforts to replace the Affordable Care Act, President Trump issued an executive order designed to increase the availability of cheaper plans that do not have to adhere to all of the ACA's regulations. The order also had the effect of weakening existing ACA plans by siphoning off younger and healthier Americans who can afford to opt out of the more comprehensive coverage.
On June 21, 2018, the DOL published a final rule that expanded associated health plan eligibility by allowing more employer groups and associations to join together as a single group to purchase health coverage. The final rule permits AHPs to offer coverage to some or all employers in a state, city, county or multistate metro area, or to businesses in any geographic location that share a common trade, industry, line of business or profession.
The final rule did not affect existing AHPs, but significantly loosened the criteria governing which employers, associations and sole proprietors (referred to as "working owners") were allowed to participate in AHPs going forward.
In response, 11 states and the District of Columbia joined together to challenge the final rule in court, arguing that the DOL had unreasonably expanded ERISA's definition of employer. Judge John Bates of the U.S. District Court agreed, writing in his decision on March 28 that the DOL had unlawfully expanded ERISA's definition of employer by failing to provide a "meaningful limit on the associations that would qualify as 'bona fide' ERISA employers.'" The court vacated the final rule's bona fide association and working owner provisions, but also ordered the department to determine whether any portion of the rule could still be salvaged.
Government's next steps and future of AHPs remain uncertain
In a set of questions and answers issued on April 2, the DOL voiced its disagreement with the recent ruling and confirmed its intention to challenge the court's decision, but has not yet revealed what avenue it may pursue.
"The Department disagrees with the District Court's ruling and is considering all available options in consultation with the Department of Justice including the possibility of appealing the District Court's decision and the possibility of requesting that the District Court stay its decision pending an appeal," the DOL wrote. "At this time, we have not reached a decision on how to proceed."
The DOJ has until May 28 to file a notice of appeal, and the Trump administration could seek a stay of the order pending resolution of any appeal. If a stay is issued, the final rule could remain in effect until the appeal is settled, but otherwise the regulations that existed prior to the final rule would be in place, according to the National Law Review.
Close to three dozen new AHPs have been launched recently, primarily by chambers of commerce, according to CNN. Participants in AHPs affected by the court's decision still have a right to the benefits outlined by their plan or policy, and health insurance issuers must continue to pay valid claims, but many of these plans will likely change their structure or operations going forward. The DOL has promised to make "additional information available to plan administrators as developments arise and as we continue our consultations with the Department of Justice."
The uncertainty now surrounding the future of AHPs can in some ways be extended to the ACA at large. A federal appeals court recently granted a Trump administration request to expedite oral arguments in a case challenging the legality of the ACA, which could set into motion a process that leads to the Supreme Court rendering an opinion on the matter as early as June of 2020, CNN has reported.