Judge questions Trump administration motives on association health plans

The Trump administration's paper trail of Obamacare criticism could spell trouble for newly expanded association health plans.

U.S. District Judge John Bates on Thursday repeatedly challenged the Justice Department's assertion that the Trump administration's final rule on association health plans, or AHPs, didn't aim to reshape the Affordable Care Act exchanges.

The judge appeared to take the Trump administration's intent very seriously as he pondered whether the Department of Labor overstepped its authority in expanding AHPs — the argument at the heart of Democratic state attorneys general's lawsuit to overturn the final rule.

"The case seems to me a dispute between Congress and the administration — an executive dispute with a former Congress," Bates said near the end of Justice Department's arguments.

The Labor Department expanded AHPs with a regulatory change under the Employee Retirement Income Security Act (ERISA). The law gives the Labor Department authority over group insurance regulation including governance of association health plans.

DOJ Attorney Brad Rosenberg contended to the judge that the case was fundamentally about ERISA, not about Obamacare.

But Bates pushed back on this characterization repeatedly. He pointed to Trump's 2017 executive order that directed the Labor Department to develop the AHP rule, which only indirectly referred to ERISA. The substance of the order focused on altering the coverage landscape of the individual and small group markets, Bates said.

"I don't see how we can divorce this from the Affordable Care Act," the judge told Rosenberg.

Bates also said that the Labor Department's regulatory changes for the rule affected Obamacare more than it affected ERISA.

In the preamble to the executive order referenced by Bates, Trump blasted the ACA for "severely" limiting Americans' health coverage options and generating large premium increases in state markets.

The judge also mentioned Labor Secretary Alex Acosta's Wall Street Journal op-ed last summer, in which the secretary touted AHPs as another coverage option to exchange plans.

But Rosenberg characterized the AHP rule as bolstering Obamacare's overarching goal to increase healthcare coverage. He acknowledged that the law has been "personalized" for many — as evidenced by the term "Obamacare" — but said like any law the ACA is simply a set of provisions that can evolve over time.

"Different people can have reasonable views on how to differently achieve those goals," Rosenberg said. "This rule seeks to solve problems that remain years after enactment" by offering options for cheaper coverage to people who might only qualify for the individual or small group markets.

Citing a CMS regulation from 2011, Rosenberg said that even the Obama administration affirmed that it's the Labor Department's responsibility to govern how AHPs can operate as a group insurance model under ERISA. He contended that AHPs that have long existed under current rules could be undercut if Bates sides with Democrats.

New York's assistant solicitor general Matthew Grieco, who argued for Democratic state attorneys general, also focused on the impact on the ACA, arguing that the Labor Department was guilty of overreach with the AHP rule because it would "rework" the market size of the exchanges.

Bates must rule on both the merits of the case as well as whether the Democratic attorneys general had standing to sue.

The judge promised the parties that he would deliver a decision as quickly as he could, as the lawyers noted AHPs have already been formed.

At a Wednesday White House healthcare policy round table with the president, Acosta touted the roughly 30 AHPs that have already been organized, in particular the Las Vegas Metro Chamber of Commerce AHP comprising 500 employers and 100 sole proprietors.