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Benefits

DOL Issues Association Health Plan Guidance in Light of Court Ruling on Regulations

EBIA  

EBIA  

Department of Labor Statement Relating to the U.S. District Court Ruling in State of New York v. United States Department of Labor (Apr. 29, 2019)

The DOL has issued a statement in response to the recent federal trial court decision vacating key provisions of the association health plan (AHP) regulations (see our Checkpoint article). As background, the regulations expand the criteria for a group or association of employers to be considered an “employer” under ERISA, so that a plan sponsored by the group or association will be treated as a single ERISA plan (see our Checkpoint article). According to the court, this expansion stretches the employer definition “beyond what the statute can bear.” In its statement, the DOL indicates that it has appealed the ruling, and sets forth the interim approach it will take with existing AHPs.

The statement provides that employers participating in existing insured AHPs can keep their current coverage in force until the end of the plan year or, if later, the contract term, noting that the guaranteed-renewability rules provide AHP members with an independent right to continue existing insurance coverage. Thus, employers with large-employer coverage through an AHP can continue that coverage. Once the current year ends, however, coverage must comply with applicable requirements based on the employer’s size (such as the essential health benefits requirement for small employers). Acknowledging that affected parties (including plans, employers, and participants) face compliance issues separate from coverage concerns, the DOL states that it will not take enforcement action for potential violations relating to actions taken before the court’s ruling, so long as parties meet their responsibilities to provide coverage as promised. Nor will it take action against existing AHPs for continuing to provide coverage through the end of the applicable plan or contract year. The statement specifies that HHS has advised that it will follow a similar nonenforcement policy through the end of the applicable plan or contract year. Lastly, employers are cautioned to carefully consider their near-term options since changes to coverage, such as dropping coverage voluntarily, could lead to coverage gaps.

EBIA Comment: This guidance provides AHPs and participating employers breathing room to continue their coverage through the current year. And the compliance relief is helpful—for example, it appears that participating employers need not file separate Form 5500s if the AHP makes a timely and accurate filing. But the future of AHPs under the regulations remains uncertain. For more information, see EBIA’s ERISA Compliance manual at Section XIX.D (“Is There an ERISA Plan at the MEWA Level or at the Participating Employer Level?”). See also EBIA’s Health Care Reform manual at Section XIV.A (“Introduction and Understanding Small and Large Group Markets”), EBIA’s HIPAA Portability, Privacy & Security manual at Section XVIII (“Guaranteed-Availability and Guaranteed-Renewability Rules for Large Group, Small Group, and Bona Fide Association Plans”), EBIA’s Self-Insured Health Plans manual at Section III.D (“Who Can Sponsor a Self-Insured Health Plan?”), and EBIA’s COBRA manual at Section V.M.1 (“When Does ERISA Apply at the MEWA Level?”).

Contributing Editors: EBIA Staff.

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