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DOL Rescinds 2018 Final Rule on Association Health Plans

On April 29, 2024, the U.S. Department of Labor (DOL) released a final rule that rescinds in its entirety a prior 2018 final rule on association health plans (AHPs). According to the DOL, the rescission is intended to resolve any uncertainty regarding the status of the criteria for forming an AHP, among other things. The final rule will take effect on July 1, 2024.


AHPs—Single ERISA Plans

An AHP is a type of ERISA-covered group health plan sponsored by a group or association of employers (instead of a single employer) to provide health coverage to employees of the AHP’s employer members. When an AHP is treated as a single ERISA plan, all employees covered by the plan are considered when determining the insurance market rules (that is, small group or large group) that apply to the plan. This allows small businesses to join together and enjoy many of the regulatory and negotiating advantages that large employers experience. For example, coverage in the large group market is not subject to the Affordable Care Act’s (ACA) reforms regarding premium rating restrictions and coverage of essential health benefits items and services, such as maternity and newborn care.


The DOL has released a series of advisory opinions that establish a narrow pathway for an AHP to qualify as a single ERISA plan (e.g., DOL Advisory Opinion 2008-07A). The DOL applies a facts and circumstances approach to determine whether a group or association of employers is a bona fide employer group or association capable of sponsoring an ERISA plan on behalf of its employer members.


2018 Final Rule

The final rule from 2018 would have made it easier for an AHP to be considered a single ERISA plan. However, on March 28, 2019, a federal district court vacated key portions of the final rule. The court specifically ruled that the DOL’s expansion of the term “employer” to include associations of disparate employers and working owners without employees was an unreasonable interpretation of ERISA. Due to this ruling, the 2018 final rule was never fully implemented, and the DOL is not aware of any existing AHP formed based on the final rule.


2024 Rescission

The DOL is now rescinding the 2018 final rule in its entirety. According to the DOL, the rescission does not affect the ability to operate or form an AHP pursuant to the facts and circumstances approach of the pre-2018 rule guidance. The DOL believes the rescission will resolve uncertainty, allow for reexamination of the criteria for forming an AHP that is a single ERISA plan and ensure that guidance is consistent with ERISA.


HIGHLIGHTS

  • DOL guidance allows certain bona fide employer groups or associations to maintain single ERISA plans.

  • An AHP that is considered a single ERISA plan can avoid certain ACA reforms.

  • A final rule from 2018 would have made it easier for unrelated employers to form single ERISA plans.

  • Key portions of this final rule were vacated by a 2019 court ruling as being inconsistent with ERISA.

  • Consistent with its earlier proposal, the DOL is rescinding the 2018 final rule in its entirety to support the ACA’s protections and resolve any uncertainty on AHPs.


Provided by De La Torre & Associates Insurance Services, Inc.

This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2024 Zywave, Inc. All rights reserved.





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