DOL to Appeal District Court Holding on AHPs
On April 29, 2019, the DOL published a statement regarding the March 28, 2019, district court ruling that invalidated major provisions of the DOL’s final rules on association health plans (AHPs). See our article on the ruling in the April 2, 2019, issue of Compliance Corner. In that decision, the U.S. District Court for the District of Columbia held that the DOL’s AHP rules violated ERISA by impermissibly expanding the scope of AHPs (which are considered multiple employer welfare arrangements, or MEWAs, under ERISA). Until recently, the DOL had not indicated whether it would appeal the decision or request a stay on the holding (meaning the court’s ruling would be on hold pending the appeal — this is a common request made to prevent a court’s ruling from taking effect while issues are still being litigated in court).
The DOL now indicates that it has appealed the ruling. However, at this point there’s no indication that the DOL has requested or that the court has granted a stay. As a result, the court’s ruling is in effect, meaning associations cannot form self-insured AHPs under the new rule. In addition, AHPs that had already formed pursuant to the DOL’s final AHP rules should be paying claims but, going forward, should not be marketing to new enrollees (particularly sole proprietors as so-called “working owners”). According to the DOL’s statement, employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term; this is meant to help employees keep their coverage in force. That intention seems to indicate the DOL’s focus on ensuring that participants and beneficiaries are paid health benefit claims as promised.
To that end, the statement also indicates that carriers must generally continue the coverage in force for each participating employer and its covered employees at the employer’s option through the end of the plan year. Then, at the end of the plan year, the carrier would only be able to renew the coverage for an employer member of an AHP if the coverage complies with the relevant market requirements for that employer’s size. This would revert the rating rules to the old DOL rules — making it much more difficult for AHPs to have large group status for ERISA application (ERISA would apply at the individual employer level) and for large/small group rating purposes. Thus, coverage sold to a sole proprietor AHP participant would have to comply with individual market/rating rules, and coverage sold to a small employer AHP participant would have to comply with small group market/rating rules.
States may also have a say in reacting to the district court ruling and DOL appeal. At least one state (Vermont) has published guidance stating that the state won’t be approving new AHPs, and that current AHPs should stop advertising and enrolling new employer groups. We anticipate more states weighing in, and will continue to monitor developments on this issue.