Judge strikes down association health plans, calls them 'magic trick' to avoid ACA

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A federal judge has struck down the White House's plan to expand association health plans. (Pixabay)

A federal judge has rejected the Trump administration's attempt to expand association health plans.

In a 43-page ruling (PDF), District of Columbia District Judge John Bates said that the Department of Labor's rule, which would allow associations and employers to join forces to launch the plans, oversteps the administration's authority under the Employee Retirement Security Income Act (ERISA).

The rule, which was finalized last summer, is clearly aimed at skirting compliance with Affordable Care Act coverage requirements, Bates said in the opinion.

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"The final rule is clearly an end-run around the ACA," he wrote. "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."

RELATED: Association health plans take center stage at House hearing on protections for pre-existing conditions

DoL deploys a "magic trick" in the way it defines employers and employees to make it fit within ERISA requirements, Bates said. Under the rule, two owners with no employees can form an association and are considered both employers of their companies and employees within the association—retaining "both hats," as it were.

He said the definition borders on "absurdity."

"An association of two working owners without employees has no employers or employees—DOL’s explanation is pure legerdemain," Bates ruled.

The expansion of association health plans has been controversial, as critics argue these plans amount to "junk" coverage because they're not required to meet ACA coverage standards and lack consumer protections.

Proponents of the plans, however, note that those on the market are often fairly comprehensive, and that these plans can save employers and employees a significant amount of money on benefits. Kev Coleman, a health policy expert and the founder of AssociationHealthPlans.com, a site that aims to informer both employers and consumers about such policies, called the ruling "disappointing" and said it "represents clear harm to small businesses across the nation."

RELATED: State approaches to short-term, association health plans vary, experts say

"Thousands of employees and family members within the small business community have already enrolled in association health plans – which help lower health care costs – since they first became available last fall," Coleman said in a statement to FierceHealthcare. "They have provided a means by which broad benefits may be accessed at more economical prices."

"While I do not believe today’s ruling will survive appeal, I believe Judge Bates' decision is an unnecessary detour on small businesses’ path toward more affordable health coverage," he added.

The ruling in the case, which was brought by the attorneys general of 12 states in July, shortly after the rule was finalized, marks another setback just this week in the Trump administration's health policy efforts. On Wednesday, another DC judge tossed Medicaid work requirements in two states, Kentucky and Arkansas, sending the Department of Health and Human Services back to the drawing board on how to approve such requests.

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