In a win for healthcare consumers, a federal judge in Washington D.C. last week struck down major parts of a Department of Labor regulation that expanded the ability of small employers and sole proprietors to band together to form Association Health Plans (AHPs) to evade key requirements of the Affordable Care Act (ACA).
Although AHPs are bound by some of the requirements of the ACA, they do not have to provide all of the benefits mandated under the ACA, and they can use factors such as age, gender and occupation to set premiums when other small plans may not do so. While the Department of Labor touted the regulation as providing a way for small businesses to get more affordable health insurance coverage, critics said that the new regulation was an invitation to fraud, by giving incentives to shady operators to offer cheap plans that are literally too good to be true. State and federal regulators have regularly tried to clamp down on such fraudulent schemes, which have left workers and their families with hundreds of millions of dollars in unpaid medical claims over the years. In addition, many saw the regulation as a not so subtle way to undermine the ACA, by gutting many of the consumer protections and attracting healthier people away from the ACA marketplaces with lower premiums.
Attorneys general from eleven states and the District of Columbia brought suit, claiming the regulation violated both the ACA and ERISA, the federal statute that regulates employer-provided healthcare plans and other employee benefits. The district court agreed, holding that the regulation could not be squared with ERISA because it allowed unrelated employers and business owners with no employees to join AHPs, thereby expanding the concept of ERISA healthcare plans beyond the context of employment. The court also concluded that the regulation created absurd results under the ACA, and would “undermine the market structure that Congress so carefully crafted.” The court has asked the government for briefing on whether any part of the regulation can stand given last week’s ruling. Once the Court has ruled on that final issue, the Department of Justice has indicated that it will appeal. In the meantime, many consumer healthcare advocates are celebrating the court’s order disallowing what they saw as an attempt to do an end-run around ERISA and the ACA.