The Biden administration is under pressure to take action on association health plans, which have been mired in regulatory uncertainty since a federal court voided a Trump-era regulation three years ago.
The plans allow small businesses to band together and offer health insurance as a large group. The Trump administration eased requirements for the plans with a rule that the U.S. District Court for the District of Columbia struck down in 2019.
The Trump administration appealed the decision to the U.S. Court of Appeals for the D.C. Circuit, where the case has stalled as the Biden administration continues to review it.
The lack of legal certainty around the plans creates confusion for consumers, businesses, and people trying to sell them. There are also regulatory and enforcement gaps between the federal government and the states, which have passed their own rules for the plans.
A coalition of trade groups who support association health plans want certainty, either from the court or from states passing laws allowing these plans, said Christopher Condeluci, a health-care attorney who helped write portions of the Affordable Care Act as counsel for the Senate Finance Committee.
Advocates of association health plans want to see the Biden administration “provide some sort of certainty or have the circuit court issue a ruling that provides” certainty to allow for these plans, Condeluci said. The advocates want to see the administration allow flexibility for these types of plans but still ensure they provide comprehensive coverage.
AHPs formed prior to the Trump administration’s regulation had to have members share a common interest, create the association for purposes other than providing health insurance, and have one or more employees in addition to the business owner to be treated as a group health plan under the Employee Retirement Income Security Act. The Trump rule relaxed the provisions around the purpose of the association and the employee requirements, among other measures.
The judge’s decision prevented the formation of new self-insured AHPs, but it didn’t address what happens to those already in existence, and what kind of enforcement actions states or the federal government can take against them. Any AHPs offering health coverage to individuals or small employers can’t qualify as ERISA plans and are thus subject to the ACA’s consumer protections, such as coverage of pre-existing conditions and essential health benefits.
The Biden administration could rescind the Trump-era rule or propose a new regulation using the Obama-era policy that insurance companies in small group markets or individual markets must operate by the corresponding rules for each market, said Sabrina Corlette, co-director of the Georgetown University Center on Health Insurance Reforms.
The Biden administration hasn’t signaled it plans to act on the issue. The Labor Department didn’t immediately respond to a request for comment about whether it’s planning any new regulations or to rescind the Trump administration rule.
Amid the regulatory uncertainty, “people may have wrong understandings of what rights they have, what protections they have,” said Mila Kofman, executive director of the D.C. Health Benefit Exchange Authority, which operates the District’s ACA marketplace. “Until the Department of Labor actually rescinds the problematic AHP regulation, we’ll continue to see a lot of confusion.”
Kofman said she often hears from insurance brokers about AHPs that may not meet minimum requirements so it can work with the other relevant city agencies to stop the sale of these plans.
Those products are often sold by “fictitious groups” and claim to be association-type group coverage, Kofman said. Recently, one such product was marketed by a legitimate association as comprehensive coverage, but was a bare-bones plan, she said.
At least seven states passed laws allowing for more AHPs similar to the Trump regulation after the court struck down the rule. Four states did so prior to that. The most recent—Virginia—has been passed by both the state House of Delegates and Senate, and awaits the governor’s signature.
The North Carolina and Florida laws allow small employers to offer an AHP based on a shared geography or industry and include individual business owners who don’t have employees other than themselves.
Several states have adopted the Trump administration’s rule as state law, ignoring what the court said, according to Timothy Jost, an emeritus professor at Washington and Lee University School of Law.
“In Virginia, we’re going to start seeing a proliferation of association products,” Kofman said. “I don’t think Virginia is unique, I think in other states there’s an effort to pass DOL-like Association Health Plan legislation.”
State legislators are trying to respond to the demand “to do something about these backbreaking” health-care costs, Corlette said. These bills don’t address the problem and instead “shift the costs around and make insurance cheaper if you’ve got healthier workers and more expensive if you’ve got sicker workers,” she said.
Health analysts say the confusion is likely to persist unless the Biden Labor Department moves ahead with its own regulations.
“It’s been on hold for a long time and at some point, someone has to do something,” said Katie Keith, director of the health policy and the law initiative at Georgetown Law’s O’Neill Institute. “The court’s either going to restart the case and issue a decision, which I don’t think is a good thing. Or the Biden administration just needs to issue a proposed rule agreeing with the court.”
“It seems, from my perspective, quite straightforward to undo the association health” rule, Keith said. “It’s not been in effect for years at this point, it’s sort of a cleanup job at this point to formalize that these provisions are no longer on the books.”