A federal judge’s decision to vacate the Labor Department’s 2018 rule expanding access to association health plans could cause thousands of people covered through such plans to lose their insurance. Whether and how soon that happens depends on the Labor Department's appeals decision and the likelihood of the judge granting a stay of his order in the interim.
A Justice Department spokesperson said March 29 the department disagrees with the ruling and is considering all options, but will “continue to fight for sole proprietors and small businesses so that they can have the freedom to band together to obtain more affordable, quality healthcare coverage.”
Since the rule was finalized in June last year, 30 to 35 association health plans have been created, providing access to health benefits to thousands of individuals. But critics of the plans warn that they don’t provide as comprehensive coverage or as many consumer protections as individual and small group plans under the Affordable Care Act, and they siphon healthy individuals away from the exchanges.
Still, “if the court ruling is effective immediately, then the reality is thousands of people who currently are covered by an association health plan that was effective Jan. 1, 2019, will lose their coverage. If the critics of association health plans are so concerned about people losing coverage because of a judge's decision, they should be concerned about that,” said Chris Condeluci, a health policy consultant and lawyer who has helped organizations set up such plans.
Condeluci argued that D.C. District Judge John Bates’ opinion shows he misunderstood the ACA’s requirements by writing the association plan rule is “an end run around the ACA” in that it allows small businesses and individuals to avoid certain requirements imposed by the ACA, and “avoid the choice that other large employers must make between providing essential health benefits or paying a shared-responsibility payment.”
Condeluci pointed out that large employers are not required to provide the 10 essential health benefits. Instead, they must provide “minimum value,” meaning they must cover at least 60% of the cost of the benefits covered under the plan. He mentioned that most AHPs voluntarily provide the essential health benefits anyway.
Ed Leeds, an employee benefits lawyer with law firm Ballard Spahr, said the ruling will likely have a “chilling effect on the formation of association health plans,” particularly in D.C. and the 11 states that challenged the Labor Department rule. Some organizations, including the Financial Services Institute, had already put plans to form an association health plan on hold while the rule was being challenged.
Leeds found the judge’s decision “well-reasoned,” however, and said that while the judge uses strong language about the intent of the rule to allow more small businesses and people to avoid ACA requirements, the opinion was grounded in what the Employee Retirement Income Security Act of 1974, or ERISA, was intended to do and its limitations.
Bates concluded that the rule “does violence to ERISA” by extending the definition of an employer beyond what the statute allows. It also departs significantly from prior Labor Department subregulatory guidance, he wrote, in allowing disparate employers in the same geography, for instance, to form association health plans, and allowing organizations to band together for the sole purpose of providing health benefits to members.