US Department of Labor proposal reinforces consumer health care protections

WASHINGTON – The U.S. Department of Labor today announced a proposal by its Employee Benefits Security Administration intended to support critical health care protections for consumers by rescinding its 2018 rule, “Definition of Employer – Association Health Plans.” 

The 2018 rule expanded the definition of association health plan in a way that would have allowed some individual and small group health insurance coverage to be treated as large group coverage and evade critical consumer protections under the Affordable Care Act, which requires coverage of essential health benefits such as emergency and maternity and newborn care. Specifically, the 2018 rule established an alternative set of criteria for determining when a group or association of employers is acting “indirectly in the interest of an employer” under section 3(5) of the Employee Retirement Income Security Act for purposes of establishing an association health plan as a multiple employer group health plan, allowing the AHP to evade ACA consumer protections. 

The 2018 rule’s alternative criteria were set aside by the U.S. District Court for the District of Columbia in a 2019 decision. The district court found the bona fide association and working owner provisions in the rule to be an unreasonable interpretation of ERISA, inconsistent with congressional intent that ERISA applies to employee benefits arising out of employment relationships. The 2018 rule was never fully implemented, and the department is not aware of any existing AHP formed based on the rule.

“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,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. 

The department is proposing to rescind in full the 2018 rule to resolve any uncertainty regarding the status of the standards established under the rule, allow for a reexamination of the criteria for a group or association of employers to be able to sponsor an AHP, and ensure that guidance being provided to the regulated community is in alignment with ERISA’s text, purposes and policies.

The proposed rule will have a 60-day period for public comments and includes instructions on how to submit comments.