Judge John Bates of the US District Court for the District of Columbia recently struck down two parts of the US Department of Labor’s (DOL’s) final regulations on Association Health Plans (AHPs). On March 28, Judge Bates ruled in favor of the plaintiffs, 11 states and the District of Columbia, which claimed that the DOL’s final AHP regulations misinterpreted the definition of “employer” under ERISA and also violated the Patient Protection and Affordable Care Act (ACA).
As general background, AHPs are group health plans that employer groups and associations offer to provide health coverage to employees of their members. The final regulations relaxed the criteria for qualifying as a bona fide association, allowing small businesses and individuals (including sole proprietors) to join together to buy health coverage even if they had no common bond other than purchasing health coverage together. Participation in an AHP allowed member companies, especially sole proprietors, to avoid some of the regulatory requirements imposed under the ACA by having the AHP qualify as a “large employer” plan. Judge Bates struck down the relaxed criteria, noting the absurdity of treating an association of 51 sole proprietors as “a ‘large employer’ free from the ACA’s individual and small-group market requirements.”
Judge Bates sent the final ruling back to the DOL to consider how it impacts the remaining valid portions of the regulations. In response to the district court’s decision, the DOL published a set of Questions and Answers (Q&As) to address questions that may arise following the decision. The Q&As make it clear that the DOL disagrees with Judge Bates’s ruling and is considering all available options in consultation with the US Department of Justice, including the possibility of appealing the decision and requesting that Judge Bates stay his decision pending an appeal.