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Gauging the Impact of Association Health Plan Court Ban

While DOL appeals ruling, existing AHPs are allowed to keep operating.

The U.S. Department of Labor (DOL) is appealing a federal district court judge’s decision striking down the regulations that had substantially widened access to association health plans (AHPs) for small and large employers.

The Labor Department also issued a policy statement providing interim relief for those employers who already had obtained health coverage from AHPs under the same DOL regulations before the judge handed down his decision on March 28.

DOL declared that it is committed to taking all appropriate action within its legal authority to minimize undue consequences on employees and their families. It said employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term. During this time, DOL said, it will not pursue enforcement actions involving AHP that had relied on DOL’s rules.

DOL stated, “The department is committed to taking all appropriate action within its legal authority to minimize undue consequences on employees and their families.” Abruptly terminating coverage from an AHP would cause significant disruption, according to DOL’s Employee Benefits Security Administration (EBSA).

“For example, new coverage would impose new deductibles and out-of-pocket maximums without giving credit for prior participant out-of-pocket expenses paid,” EBSA argued. “Moreover, switching insurance can cause gaps in coverage, leaving individuals without much needed benefits for chronic diseases and emergency care until the new insurance becomes effective.”

About 30 new associations had been formed based on the rules change before the court’s reversal was announced, notes attorney Jeff Belfiglio of law firm Davis Wright Tremaine. For example, local chambers of commerce in Nevada had joined with the Anthem insurance company to offer coverage for small employers.

More employers may have chosen to join AHPs except that their states used their regulatory authority to effectively stop AHPs from being formed under the new Trump DOL rules, and few are likely to proceed with more AHPs unless the district court ruling is overturned, Belfiglio points out. However, AHPs can and still are forming under the narrower federal guidelines that were in existence before the newer rules, and which both the AHP rule and the court decision left intact.

The Political Game

Before Trump’s DOL wrote the new rules, federal law had long allowed AHPs to be created and operate in a more limited form under the Employee Retirement Income Security Act of 1974 (ERISA). The main difference was that the older rules required much more narrowly defined commonality of interests for employers to be able to join an AHP.

Belfiglio adds that the court decision also could impact a proposed regulation allowing employers to band together more easily in Association Retirement Plans (ARPs) or Multiple Employer Plans (MEPs). Last year, DOL issued proposed regulations designed to allow multiple employers to join in an ARP or a plan sponsored by a Professional Employer Organization (PEO).

The AHP rules were seen as an attempt to weaken Obamacare because such plans were allowed to deny coverage for a number of treatments that had been required under the legislation, including mental health and substance abuse treatment, certain kinds of maternity care and ambulance rides.

The judge whose decision struck down the Trump program described it as “clearly an end-run around” Obamacare. The lawsuit to block the AHP rules was filed by Democrat attorneys general of 11 states. The judge ruled that the membership criteria for the new AHPs were too broad and stated that the portion of the program that allowed the self-employed and partnerships to join such plans was nothing short of absurd.

“At this point small employers in some states (especially Washington) can still find opportunities to join AHPs that have been approved under the old DOL guidance,” explains Belfiglio. “Employers in other states, and working owners everywhere, will have to await a judicial or legislative resolution of what ‘employer’ really means under ERISA.”

DOL announced that it is interested in learning about any problems that AHPs and their member employers and sole proprietors may have encountered after the district court's decision. To request information or assistance, members of the public may contact EBSA at www.askebsa.dol.gov or toll free at 866-444-3272. The agency also said it will update its website at https://www.dol.gov/agencies/ebsa as more information becomes available.

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