Last year, the Department of Labor (DOL) issued guidance expanding access to Association Health Plans (AHPs). That rule was developed in response to Executive Order 13813, issued in October 2017, from President Donald Trump that directed the Secretary of Labor to expand access to health coverage through the use of AHPs, short-term limited duration insurance, and health reimbursement arrangements (HRAs).
Historically, groups or associations of employers could only band together to purchase health insurance coverage if the group had a commonality of interest and met other requirements. These requirements were established through prior DOL guidance and a series of court cases. This guidance continues to apply and groups of employers are still permitted to establish an AHP under these older rules.
As we reported last summer, the new guidance significantly expanded access to AHPs by modifying the commonality of interest requirement and allowing self-employer “working owners” to obtain coverage through AHPs. This essentially created a secondary ‘track’ for establishing AHPs since they could still be established under the older rules (as discussed previously). Under the new guidance, AHPs could be formed so long as they have at least one substantial business purpose unrelated to providing health care, such as establishing business standards or offering educational materials to their members.
The final rule allowed fully-insured AHPs established under its guidance to provide coverage as of September 2018. Existing self-insured AHPs were allowed to expand under the new rules as of January 1, 2019 and new self-insured AHPs were allowed to be formed as of April 1, 2019.
While some praised the new rule as expanding access to healthcare for employees of small employers, others were concerned that the rules would allow plans to band together for the mere purpose of avoiding the stringent Affordable Care Act (ACA) requirements applicable to the small group market. Citing this concern in addition to the claim that the new regulations violate the Employee Retirement Income Security Act of 1974 (ERISA), which governs health and welfare benefit plans, eleven states and the District of Columbia sued the DOL.
D.C. Circuit Court strikes down rule.
In its decision published last week, the D.C. Circuit Court struck down the rule stating that the new criteria for establishing an employer under the expanded commonality of interest requirement contradict provisions of ERISA and the ACA. Even though this new guidance was struck down, groups of employers are still permitted to establish an AHP under the old rules, which have stricter requirements for establishing a commonality of interest.
Following the court’s decision, the DOL can either request an appeal of the decision or revise its rule. We will be sure to update this post as updates become available.