The DOL rule expanded eligibility for small employers and other groups such as trade associations, to offer AHPs to employees and members.
In State of New York v. U.S. Department of Labor, U.S. District Judge John Bates ruled the DOL rule violates the 1974 Employee Retirement Income Security Act (ERISA) definition of an “employer.”
The Trump administration is appealing the decision.
ACA vs. AHPs
Under the ACA, health insurance plans must include “essential benefits,” a set of 10 forms of coverage. Included among those mandates are services for mental and behavioral health treatment and maternity care. For small businesses and trade associations, AHPs offer a more affordable and less comprehensive alternative to plans that follow the rigid ACA guidelines.
Tim Benson, a policy analyst at The Heartland Institute, which publishes Health Care News, says AHPs benefit people by providing more choices of affordable health insurance.
“AHPs give people many more options and a better chance to find a reasonably priced plan that best suits the needs of their family,” said Benson.
With AHPs, employers can assess which benefits their employees need most and provide health insurance plans that meet those needs. AHPs are more flexible and affordable than most other health insurance plans because they do not have to meet all the Obamacare requirements and they can create larger risk pools by consolidating many individuals and organizations into their plans.
Since the Trump administration took office, about 30 AHPs have been formed. Before the ruling, approximately four million Americans were expected to enroll in AHPs by 2023, according to the Congressional Budget Office. That number includes roughly 400,000 Americans who would be uninsured if AHPs were not available.
Many groups support the AHP regulatory reform. Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, wrote the new rules were “a major step in the right direction for small businesses and the millions of Americans who will now be able to buy lower-cost health insurance plans.”
Question of Intent
In the judicial decision, Bates stated the Trump administration had essentially ignored the letter of the law.
“The final rule was intended and designed to end run the requirements of the ACA, but it does so only by ignoring the language and purpose of both ERISA and the ACA,” Bates wrote in his ruling. Bates claimed the Trump administration’s intent for the AHP rule was to defy the will of Congress, and he said Trump’s negative public comments on the ACA are the evidence of that.
Benson says the ruling will be most detrimental to small businesses and other people who don’t receive health insurance from large employers.
“This is an unfortunate ruling that is going to hurt many small businesses and families,” Benson said. “AHPs are great because they allow consumers to purchase insurance at lower rates thanks to the increased negotiating power larger groups naturally have with insurance companies, and these larger groups also help spread out costs.”
The ruling against AHPs could have a big impact on the nation’s health insurance industry, prompting several organizations to take action. Shortly after the case was filed, the U.S. Chamber of Commerce and the Society for Human Resource Management filed an amicus brief supporting the rule.
“This case raises an issue of significant importance to amici’s members and to all of America’s small businesses—the availability of real opportunities for small employers to access quality, affordable health insurance coverage for their employees,” the brief stated. “Amici are intimately familiar with the problems small businesses encounter when attempting to secure such coverage and have a strong interest in seeing the Labor Department’s Final Rule go into effect.”
Josh Archambault, a senior fellow for the Foundation for Government Accountability, says despite the ruling, states should pass legislation to ensure small businesses and trade associations have the freedom to offer AHPs that best meet the needs of their employees and members.
“It is not yet clear what the full effect of this ruling will be, … so states should proceed with updating their laws in order to empower small businesses to take full advantage of association health plans and new federal flexibility,” Archambault said. “In doing so, states can ensure that small businesses and entrepreneurs have the same access to affordable health insurance as large employers.”
Less than two weeks after the ruling, House Republicans introduced the Association Health Plans Act, which would make it easier for small businesses across the country to offer affordable AHPs. Companion legislation was introduced in the U.S. Senate.
According to bill sponsor Sen. Mike Enzi (R-WY), the legislation would guarantee small businesses have the ability to offer AHPs without facing the strict restrictions imposed by the ACA.
“As a former small-business owner, I understand firsthand the difficulties that employers face when trying to provide health insurance for their employees,” Enzi wrote in a news release. “Association Health Plans work for small businesses. They provide coverage to people who would not otherwise have it, and they provide comprehensive health benefits at an affordable price the same way larger employers do—the same way most folks get insurance.
“One family shoe store probably cannot get an insurance company to play ball, but 1,000 family shoe stores probably could,” Enzi said.
Emma Kaden ([email protected]) is a publications intern at The Heartland Institute.