The Department of Labor issued new guidance on Monday in response to the recent court ruling that invalidated the association health plan (AHP) final rule as a deliberate and illegal “end run” around the ACA. The newly released questions and answers document confirms that AHPs cannot market to or enroll new members, although previously-existing AHPs are allowed to continue to operate. This guidance follows an initial response by the administration in April confirming that state insurance departments continue to have the authority to oversee AHPs and that claims must be paid. Late last month, rather than rescinding or revising the rule, the Administration appealed the lower court’s decision to the D.C. Court of Appeals.
The rule had three staggered implementation periods: the first began on September 1, 2018, and allowed for any new or existing associations to establish a fully insured AHP; the second began on January 1 and allowed existing associations that sponsored an AHP on or after the date of the final rule to establish a self-funded AHP; and on April 1 all other associations (new or existing) were able to establish a self-funded AHP. Nearly three dozen AHPs have formed under the new rule, and roughly 4 million Americans had been expected to enroll in an AHP by 2023.
The ruling by U.S. District Court Judge John Bates, a George W. Bush appointee, was that these plans don’t meet the coverage rules of the ACA, and arguably violate ERISA. He specifically called out the direct violation of ERISA in the AHP rule’s attempt to change the definition of employer to allow an association to be formed for the sole purpose of offering health insurance – as long as one other service is provided to members – and to allow working owners with no employees to be counted as both the employer and employee in joining a group AHP. NAHU specifically raised our concerns with potential issues of conforming the AHP rule with ERISA as part of comments we submitted on the draft proposal last year.
Last month, more than two dozen Senate Republicans introduced legislation that would codify the expansion of AHPs into law. That legislation would establish in statute the new AHP pathways for small businesses so that they could continue to be offered. Without a legislative fix to the invalidated rule, all of the AHPs established under the Trump Administration rulemaking would have their legal status in jeopardy, unless the administration is able to release updated rules that are deemed permissible, or a higher court overrules the lower court and allows the plans to operate under the original regulation.