The Department Of Labor Proposes Rescinding The Association Health Plans Rule

CATEGORY: Client Update for Public Agencies, Public Education Matters
CLIENT TYPE: Public Employers
DATE: Feb 02, 2024

The U.S. Department of Labor (DOL) has proposed rescinding the Association Health Plans rule (AHP Rule) it created in 2018.  The AHP Rule relates to multiple employer group health plans.  The AHP Rule established criteria for determining when a group or association of employers is acting “indirectly in the interest of an employer” to constitute an a bona fide group or association for purposes of sponsoring a single, multiple employer group health plan covered by Employee Retirement Income Security Act (ERISA).  The intent of the AHP Rule was to expand access for affordable health coverage for employees of small employers and certain self-employed individuals by lessening the restrictions to create an association health plan, which would be subject to the less regulated large group market.

Prior to the DOL’s proposal to rescind the AHP Rule, the AHP Rule had previously been set aside due to the lawsuit New York v. United States Department of Labor filed in the U.S. District Court for the District of Columbia.  The District Court found the AHP Rule to be inconsistent with the ERISA’s intent to have employee benefits arise out of employment relationships since the AHP Rule extended the definition of “employer” to include non-employment relationships.  For example, the definition included business owners who had no common-law employees but were members of an employer association.

The DOL is rescinding the AHP Rule because it is now of the view that the AHP Rule does not align with ERISA.  Prior to a final decision about rescinding the AHP Rule, the DOL is taking public comments from interested parties until February 20, 2024.

Any small public agency employers who are providing employees with health coverage through an associate health plan are advised to review the proposal to rescind the AHP Rule and assess any potential impact on its health benefits.

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