A regulatory change aimed at helping more restaurants and other small businesses afford employee health insurance was struck down last week by a federal judge, who blasted the measure as “clearly an end run around” the Affordable Care Act.
The decision by Federal District Court Judge John Bates came in a lawsuit filed by 11 states and the District of Columbia to overturn a 2018 change by the U.S. Department of Labor (DOL) in the rules governing association health plans (AHP). The revisions last year opened the way for associated small businesses to pool their purchasing power and buy insurance for employees as if the affiliated enterprises were a single large employer. The new rules permitted the groups to include participants from multiple states.
The hope for the restaurant industry was that franchisees of chains would band together and purchase coverage as an association, as might independent operators in a particular geographic region. All that was needed to form an AHP was a “commonality of interest.”
Their collective purchasing power was expected to drive down costs and bring the price of insurance within the reach of more operations.
The industry already had a major AHP through the National Restaurant Association, which formed and brought the plan to market before the 2018 rule change. That AHP is unaffected by last week’s court decision, according to a statement issued by the group.
States objected to the 2018 rule change because AHPs formed under the new regulations would not be subject to the same stringent requirements imposed by the Affordable Care Act on plans offered through the online state insurance marketplaces created by the landmark law, also known as Obamacare. Offering AHPs could also syphon insurers away from the exchanges, undercutting the collective buying might the state exchanges hope to wield.
They argued that an AHP was not an employer and that the laws governing insurance clearly empower employers, not entities acting in the interest of employers.
Judge Bates agreed with the plaintiffs’ contention that DOL’s reinterpretation of employer “is not reasonable” and mandates, along with other provisions, that the new DOL regulations be set aside.
“Judge Bates’ ruling on the new Department of Labor regulation is not only disappointing but also represents clear harm to small businesses across the nation,” said Kev Coleman, president and founder of AssociationHealthPlans.com. “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. They have provided a means by which broad benefits may be accessed at more economical prices.”
Coleman said in a statement that he expects the ruling to be overturned upon repeal.