Last June, the Department of Labor (DOL) finalized regulations to expand the opportunity to offer employment-based health insurance to small businesses through small business health plans, also known as association health plans (AHPs).
According to DOL leadership, the regulations were designed to give small employers a greater ability to join together and gain many of the advantages enjoyed by large employers in the provision of health insurance to employees. However, a new court ruling, responding to lawsuits filed by 11 states and the District of Columbia, has determined that the DOL overstepped its authority in crafting the new regulations.
The states alleged that the DOL’s interpretation of the definition of “employer” in the AHP regulations stretches the definition of “employer” beyond what the Employee Retirement Income Security Act’s (ERISA)’s text and purpose will bear. And, the U.S. District Court for the District of Columbia has agreed.
U.S. District Judge John D. Bates notes in his opinion that because the Affordable Care Act (ACA) defines terms key to its implementation—including “employer” and “employee”—according to the definition of these terms in ERISA, the DOL’s final rule expands AHPs in a way that allows small businesses and some individuals to avoid the health care market requirements imposed by the ACA. “The final rule is clearly an end-run around the ACA. Indeed, as the President directed, and the Secretary of Labor confirmed, the final rule was designed to expand access to AHPs in order to avoid the most stringent requirements of the ACA,” Bates wrote.
Bates determined that the DOL’s final rule exceeds the statutory authority delegated by Congress in ERISA. He concluded that the final rule’s provisions defining “employer” to include associations of disparate employers and expanding membership in these associations to include working owners without employees are unlawful and must be set aside.
Industry groups have expressed concern with the court’s ruling, as some AHPs have already been rolled out based on the DOL’s now-defunct rule. According to AssociationHealthPlans.com, chambers of commerce are the single most common organization sponsoring new regional AHPs.
A new study on chamber of commerce association health plans “painfully illustrates the insurance gains that will be lost to small businesses if the recent court ruling is not overturned,” says Kev Coleman, president and founder of AssociationHealthPlans.com. “Should the ruling stand, we will return to the prior unfair system where large companies will pay less than small companies for the same health benefits.”
According to the group, through the new DOL regulation, the same large company insurance model that already covers roughly 95 million Americans was made available to small businesses through associations. “This change has been a matter of market access. The definition and rules related to large company health insurance have not changed,” it says. “Instead, the playing field between small companies and large companies was leveled with respect to health insurance costs. The preservation of this leveling is likely dependent on a successful appeal of Judge Bates’ ruling unless Congress decides to act.”The Financial Services Institute (FSI) said in a statement: “We urge the Trump Administration to appeal this ruling. What’s at stake is access to quality, affordable health care plans for millions of Americans, and thousands of our members. We have made access to better health care for financial advisers a priority for the last two years, making it a top issue during last year’s Capitol Hill Day, writing a comment letter to the Department of Labor supporting the rule and participating in a coalition that wrote an amicus brief to the court. We will continue to champion this issue. While we wait for an appeal to the ruling, we will continue our work behind the scenes to make better health care for our members a reality.”