A recent court decision calls into question the Department of Labor’s 2018 final rule on association health plans (“AHPs”). On March 28, 2019, the United States District Court for the District of Columbia found that the rule’s interpretation of the term “employer” unreasonable and invalidated several components of the previously issued rule, a rule which made it easier to form association health plans.
This decision, and the DOL’s subsequent moves to appeal the decision, creates further uncertainty as to the legality of existing AHPs and the status of AHPs moving forward. On May 13, 2019, the DOL issued further guidance on this matter to clarify how DOL enforcement activities will play out in light of the pending litigation. The DOL stated that it will focus on “ensuring that participants and beneficiaries get their health benefits claims paid as promised, and on reducing the risk of adverse consequences to employer associations [. . .] that relied in good faith on the rule.” Namely, the DOL will not take enforcement actions against associations and employers that acted based on the AHP’s final rule prior to the March 28, 2019 decision.
However, the DOL’s current stance on AHP enforcement may not be reflected by state-level regulators – and with many states already challenging the DOL’s final rule on AHPs, this may be a major area of concern and uncertainty for current AHP members. Additionally, the March 28, 2019, decision calls into question the future of AHPs as viable options for many employers. It is conceivable that this issue could remain unsettled for some time as the DOL appeals the District Court’s decision and responds to arguments raised by the states who originally challenged the DOL’s final rule on AHPs. The status of this appeal may also be affected by the upcoming 2020 election season and future administration changes– it is entirely possible that the DOL under a different administration will not pursue this appeal or raise the same arguments that have currently been advanced before the District Court.
All of this leaves employers who are currently participating in an AHP or considering moving to an AHP in a difficult position. Prior to making any changes to benefits involving AHPs, employers should work closely with their benefits advisor and legal counsel to assess the risks and opportunities involved and understand that there may not be a final answer on the implementation of the DOL’s final AHP rule for some time.