In a win for patients and physicians who warned that uninsured and underinsured rates would soar, a federal court has halted the government’s plan to expand association health plans (AHPs).
The Litigation Center of the American Medical Association and State Medical Societies, along with the Medical Society of the State of New York, late last year filed an amicus brief in a case challenging the U.S. Department of Labor’s rule that would make it easier to form AHPs.
They told the court that AHPs would undermine the Affordable Care Act (ACA) by enabling discrimination against patients with pre-existing conditions, destabilizing insurance markets, and making it likelier that patients would encounter fraudulent policies.
In rejecting AHP expansion, the U.S. District Court for the District of Columbia’s ruling said the Trump administration rule was “clearly an end-run around” of standards Congress established under the ACA. Eleven states and the District of Columbia challenged the rule, saying it was illegal and that it would cause them economic harm.
“Indeed, as the president directed, and the Secretary of Labor confirmed, the final rule was designed to expand access to AHPs in order to avoid the most stringent requirements of the ACA,” the court said in its opinion in State of New York v. U.S. Department of Labor. The court went on to say the Labor Department’s explanation of how the rule works under the ACA “relies on a tortured reading of the ACA’s statutory text that undermines the market structure that Congress so carefully crafted."
Watered-down insurance averted
As the AMA Litigation Center noted in its brief, the rule change would have meant AHPs wouldn’t have to comply with ACA protections that ensure health plans provide minimum essential health benefits, including maternity care, prescription medication and mental health and substance-use disorder services. For example, before the ACA, 75% of nongroup health plans failed to cover delivery and inpatient maternity care; 38% didn’t cover mental health services.
The AHP expansion also would have allowed companies to offer insurance policies that didn’t have to abide by protections against annual and lifetime limits and out-of-pocket expenses. And it would have allowed people to sell phony health insurance, the AMA Litigation Center brief says, noting a 2004 Congressional report showing that more than 200,000 policyholders ended up with fraudulent AHPs. That created more than $252 million in unpaid medical bills between 2000 and 2002.
The AMA strongly objected to the rule on AHPs when it was proposed and has long advocated for health insurance coverage for all Americans, as well as pluralism, freedom of choice, freedom of practice and universal access for patients.
Learn more about the AMA vision on health care reform.
Where the Labor Department got it went wrong
In denying the Trump administration from going forward with the rule, the court looked how the Labor Department rule fit into traditional definitions under the Employee Retirement Income Security Act of 1974 (ERISA), which governs employee benefit plans arising from employment relationships.
The court said the new rule adopted the same three overall criteria—purpose, commonality of interest and control—that the Labor Department has used in the past to determine which organizations were “bona fide associations” that met stringent criteria to qualify as a single ERISA employee benefit plan that could sponsor an AHP.
However, the court said, the rule “departs significantly” from the way the Labor Department has traditionally looked at the underlying guidance on how to determine whether the overall criteria were being met. The court said the new rule set the bar too low.
The district court also said the rule’s attempt to allow two working owners without employees to qualify as both and employer and employee under the ACA was clever, but also a “magic trick” that wasn’t persuasive.
The Labor Department “unreasonably expands the definition of employers’ to include groups without any real commonality of interest and to bring working owners without employees within ERISA’s scope despite Congress’s clear intent that ERISA cover benefits arising out of employment relationships,” the court said. “Accordingly, these provisions are unlawful and must be set aside.”
The Labor Department is considering whether to appeal the ruling, according to news reports.