The U.S. Department of Labor (DOL) has proposed to do away with the 2018 rule and the “Definition of Employer for Association Health Plans” (AHPs). The 2018 rule resulted from an Executive Order intending to “facilitate the purchase of insurance across State lines and the development and operation of a health care system that provide high-quality care at affordable prices for the American people.” See Executive Order 13813 at 82 FR 48385 (Oct. 17, 2017).
The 2018 rule expanded ERISA section 3(5), which determined when employers could join a group or association of employers that would allow sponsoring a group health plan. Section 3(5) in ERISA defines an employer as “…any person acting directly as an employer or indirectly in the interest of the employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such a capacity”. Prior to 2018, the DOL stated that in order for a group or association of employers to sponsor a single “multi-employer” plan, they must meet certain conditions. This included the requirement that employer members have some other business dealings unrelated to benefits. In short, do the members have sufficient economic or representational nexus or commonality of interest outside of the benefit plan? If so, these associations were known as “bona fide employer groups or associations and could establish a single multi-employer plan. The determination was fact specific.
The 2018 rule expanded this definition. The DOL established a general legal standard requiring that a group or association of employers have at least one substantial business purpose unrelated to offering and providing health coverage or other employee benefits to its employer members and their employees, even if the primary purpose of the group or association is to offer such coverage to its members. For example, an association that offers educational courses for its members could satisfy this criterion.
The rules also expanded the definition of association health plans, allowing certain individual and small group health insurance coverage to be treated as large group coverage, obtain coverage that is not subject to the regulatory complexity of the individual and small group market, and have more flexibility in plan design. This could increase bargaining power, administrative efficiencies, and more efficient allocation of plan responsibility, thus reducing costs. However, it also allowed AHP to circumvent crucial consumer protections mandated by the Affordable Care Act (ACA), including coverage for essential health benefits, such as emergency services, maternity care, and newborn care, that large employers do not have to cover.
In 2019, the U.S. District Court for the District of Columbia set aside the alternative criteria, stating the provisions in the rule to be an unreasonable interpretation of ERISA, and deemed that the DOL had exceeded its authority. The court found that the provisions strayed from the congressional intent behind ERISA’s application to employee benefits arising from employment relationships.
Assistant Secretary for Employee Benefits Security, Lisa M. Gomez, has since agreed and commented that “The Department of Labor now believes that the provisions of the 2018 Association Health Plan Rule that the district court set aside as inconsistent with the Administrative Procedure Act and in excess of the department’s authority are, at a minimum, not consistent with the best reading of the statutory requirements governing group health plans.” In light of this, the department is proposing a full rescission of the 2018 rule to eliminate uncertainty and enable a thorough reexamination of the criteria for employer groups to sponsor AHPs. The goal is to ensure guidance aligns with ERISA’s purpose and policies.
This proposed rule is now open for public comments for 60 days, allowing stakeholders to share their perspectives. This move by the DOL signifies their commitment to upholding consumer health care protections and maintaining the integrity of regulatory frameworks governing association health plans. The outcome of this discussion will likely shape the future landscape of healthcare coverage, ensuring that it remains in line with the needs and expectations of the American people.