On December 20, 2023, the Department of Labor’s (“DOL”) Employee Benefits Security Administration issued a proposed rule to rescind the Trump Administration’s 2018 Association Health Plans (“AHP”) Rule (the “Proposed Rule”). The Proposed Rule would rescind the 2018 AHP Rule in its entirety. The Proposed Rule also requests comments on codifying the pre-2018 guidance. Comments are due on or before February 20, 2023.
The Affordable Care Act (“ACA”) imposed new essential health benefits and other requirements on individual and small group market insurers to which large group market insurers are not subject. If an association is considered a “bona-fide” single-employer that would otherwise qualify for a large-group plan, it is exempted from the ACA’s small group market requirements.
The 2018 AHP Rule sought to allow small employers and working owners to join together to purchase coverage in the large group market, thereby avoiding the application of the ACA’s small group market requirements. The 2018 AHP Rule broadened the types of employer groups and associations that could sponsor a single group health plan and changed the criteria for groups or associations to be considered a bona-fide group or association that is eligible to establish an employee welfare benefit plan or to otherwise meet the definition of ‘‘employer’’ under ERISA section 3(5).
The 2018 AHP rule was challenged by several states and, in 2019, the U.S. District Court for the District of Columbia in New York v. Department of Labor remanded the rule back to the DOL.
In rescinding the 2018 AHP Rule, the Department stated it is concerned that the increased utilization of AHPs will allow small employers to avoid the ACA’s requirements and offer “skinny plans” that result in participants and beneficiaries being vulnerable to high out-of-pocket costs and not having access to benefits for care.