January 16, 2024
The Department of Labor’s Employee Benefits Security Administration (DOL/EBSA or the Department) announced a proposal on December 18, 2023 to rescind a Trump Administration rule regarding association health plans (AHPs). The 2018 regulation, entitled “Definition of Employer – Association Health Plans” (2018 AHP Rule), substantially loosened the requirements for groups or associations to meet the definition of “employer” under ERISA section 3(5), which would have permitted broader establishment of those entities. After it was first issued, the 2018 AHP Rule was challenged and materially vacated in federal court, and since then its future was uncertain. Now, the DOL/EBSA’s Notice of Proposed Rulemaking (NPRM), issued on December 20, 2023 explains the Department’s intent to go back to the guidance that applied before the 2018 AHP Rule, solicit comments on the finalization of that reversion, and determine from comments whether it should engage in future rulemaking on AHPs under ERISA section 3(5).
If working with or considering any association health plan, ensure the proposed rule (and ultimately any final rule) is appropriately taken into account for current and future health plan decisions.
Prior to the 2018 AHP Rule, DOL/EBSA primarily took a facts-and-circumstances approach to determining whether a group or association of employers is a “bona fide” employer group or association that may sponsor an ERISA group health plan on behalf of its members. The Department consistently focused on three criteria:
- 6 | “Business purpose” standard: Whether the group or association has business or organizational purposes and functions unrelated to the provision of benefits;
- 7 | “Commonality” standard: Whether the employers share some commonality of interest and genuine organizational relationship unrelated to the provision of benefits; and
- 8 | “Control” standard: Whether the employers that participate in a benefit program, either directly or indirectly, exercise control over the program, both in form and substance.
Following a 2017 executive order issued by President Trump, DOL/EBSA issued the 2018 AHP Rule that expanded and loosened these criteria which would have allowed more organizations to qualify and establish AHPs that were more like single employer group health plans. However, after being finalized, several elements of the 2018 AHP Rule were vacated by the U.S. District Court for the District of Columbia in a 2019 ruling. The federal government appealed the ruling and issued a temporary enforcement policy, communicating that DOL/EBSA would not pursue enforcement actions against AHPs that had formed based on the 2018 regulations.
Shortly after taking office in January 2021, President Biden issued an executive order stating it was the policy of the Biden Administration to strengthen Medicaid and ACA health coverage. Biden’s executive order also rescinded the prior 2017 executive order from President Trump which had directed federal agencies to expand access to association health plans, short-term limited-duration insurance plans, and certain health reimbursement arrangements.
Along with communicating the policy change to rescind the 2018 AHP Rule, DOL/EBSA is states in the 2023 NPRM that the temporary enforcement policy has long expired. The Department also states that it is not aware of any AHPs that currently exist under the framework of the 2018 AHP rule.
DOL/EBSA is accepting comments for 60-days in response to the NPRM announcing the rescission of the 2018 AHP Rule, with comments due by February 20, 2024.
While the final outcome will depend on the comments received and further public engagement, we believe it is likely that the Department will finalize rescinding the Trump-era rule in full and return to its pre-2018 AHP Rule facts-and-circumstances approach utilizing the three criteria outlined above in its review and enforcement of the requirements for AHPs. Business Group on Health will keep members informed of regulatory developments.
- Federal Register: Notice of Proposed Rulemaking – Definition of “Employer”-Association Health Plans
- DOL/EBSA: News Release
If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.
We provide this material for informational purposes only; it is not a substitute for legal advice.