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Deep Dive: DOL Appeals Federal Court’s Association Health Plan Ruling and Issues Interim Guidance

As we predicted in our last Deep Dive, the Department of Labor (DOL) has appealed the District Court for the District of Columbia’s ruling in State of New York, et al. v. United States Department of Labor, et al. which vacated key portions of the DOL’s association health plan regulation (AHP Rule). The DOL filed its Notice of Appeal with the federal district court (D.D.C.) on April 26.

In response to the Court’s ruling (and before filing its appeal) the DOL had published a Q&A-style discussion of the ruling’s impact. After filing its appeal, the DOL published an official statement (DOL Statement) outlining interim guidance for previously-formed AHPs and employers who began participating in an AHP in reliance on the AHP Rule. The DOL Statement clarifies that these employers and AHPs may continue their coverage for the time being, yet leaves key questions unanswered.   In welcome news for AHPs that sought to form under the AHP Rule, the DOL confirms its commitment to “taking all appropriate action within its legal authority to minimize undue consequences on employees and their families.”  As support, the DOL Statement reassures that:

  • Employers participating in insured AHPs formed under the AHP Rule may continue their coverage through the later of the end of the current plan year or contract term and that the Department of Health and Human Services (HHS) confirmed employers have an independent right to continue coverage through

Deep Dive: Association Health Plan Considerations following the Court Order Vacating the DOL’s Final Rule

On March 28, 2019, the Federal District Court for the District of Columbia issued an opinion and order vacating key portions of the Department of Labor’s regulation, published in June 2018, which had expanded the definition of “employer” under Section 3(5) of ERISA (the “AHP Rule”), thereby broadening the scope of association health plans (“AHPs”).  According to the Court, it is unreasonable to interpret “employer” as including working owners and groups that do not have “a true commonality of interest” and doing so leads to “absurd results” and is an “end run” around the Affordable Care Act.  The Court’s opinion was issued with immediate effect and has cast doubt on the future use of AHPs, especially self-insured AHPs.

As background, the AHP rule was promulgated in response to President Trump’s October 12, 2017, Executive Order, which directed the DOL to expand access to and allow more employers to form AHPs.  Before the Executive Order, the DOL had been characterizing AHPs maintained by a “bona fide” group or association of employers as being sponsored by a single employer (with the AHP retaining its status as a MEWA under ERISA). The AHP Rule significantly expanded such application by permitting groups or associations, including groups consisting entirely of “working owners” (self-employed individuals without common law employees), to form a single employer AHP that could qualify as a “large group” plan that would be exempt from certain Affordable Care Act reforms, such as offering the full suite of

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