FROM GROOM LAW:
Federal District Court Vacates Key Provisions of DOL’s Association Health Plan Rule
On March 28, a federal district court – the District Court for the District of Columbia – vacated the key provisions of the Department of Labor’s (“DOL”) final rule, “Definition of ‘Employer’ Under Section 3(5) of ERISA—Association Health Plans” (“AHP Final Rule”). New York v. United States Dep’t of Labor, No. CV 18-1747, 2019 WL 1410370 (D.D.C. Mar. 28, 2019). The AHP Final Rule, finalized in June 2018, was a cornerstone of President Trump’s health care policy. The DOL issued the AHP Final Rule in response to the President’s 2017 Executive Order, which directed the DOL to expand access to AHPs in order “to avoid many of the [Affordable Care Act’s (“ACA”)] costly requirements.” Exec. Order 13813, 82 Fed. Reg. at 48385. The AHP Final Rule expands the universe of arrangements that can qualify as an AHP for purposes of ERISA and applies large group treatment at the federal level to qualifying AHP coverage.
In response to the AHP Final Rule, eleven states and the District of Columbia (the “States”) sued the DOL, raising claims under the Administrative Procedure Act (“APA”). The States argued that the AHP Final Rule’s bona fide association and working owner provisions conflict with the text and purpose of the ACA and ERISA and exceed DOL’s statutory authority and, as such, the AHP Final Rule is arbitrary and capricious under the APA.
The Court agreed with the States. It found that the DOL unreasonably expanded the definition of “employer” to include associations of disparate employers (connected only by common geography). The Court also found the DOL’s inclusion of working owners (i.e., owners without common law employees) as “employers” to be unreasonable and contrary to ERISA.