By: HUB’s EB Compliance Team

The U.S. Department of Labor (“DOL”) and a few states have now reacted after the federal court decision striking down parts of the new association health plan (“AHP”) rule. For more information on those new rules, see our prior article here. For more information on the court case, see this piece from last month.

DOL’s Response

When we last wrote about the AHP case, the DOL was still exploring its options. The DOL has now taken three significant next steps. First, on April 26, DOL decided to appeal the court’s decision. The DOL and the states challenging the AHP rule will now make their arguments in front of the D.C. Circuit Court of Appeals, which hears many regulatory cases. The result of that case may ultimately be appealed to the Supreme Court (although the Supreme Court could decline to take the case).

Curiously, the DOL did not ask for a stay of the initial decision pending the appeal. A “stay” would basically keep the decision from having any effect while the DOL appeals. The DOL choosing not to ask for a stay means that the decision striking down parts of the AHP rule remains in effect while the DOL appeals. The DOL may ask for a stay later, but at this point, it has not requested one.

However, the DOL did not leave new rule AHPs high and dry. On April 29, they issued a press release and a policy statement. They also issued FAQs on May 13 to help explain the policy statement. The policy statement provides, in short, the following:

  1. Existing AHPs can keep their coverage in force through the end of the current plan year or contract term. After that, carriers for insured policies may need to rewrite existing coverage so that each association member is basically treated as having a separate plan.
  2. To the extent there are compliance issues that come from the court decision, the DOL will work with other state and federal regulators and the AHP to minimize those burdens. However, the DOL’s focus will be on ensuring benefits are provided to those enrolled in the plans.
  3. Additionally, the DOL will not pursue enforcement for potential violations of law for the rest of the current plan year or contract term. This relief only applies to actions taken in good faith based on the AHP rule before the court struck it down. In other words, people who relied on the AHP rule, and acted in good faith, have nothing to fear from the DOL. However, as the DOL confirmed in the FAQs, this does not apply to actions taken after the court’s decision.
  4. The Department of Health and Human Services (“HHS”) also advised the DOL that it will take a similar approach to the DOL with governmental plans and insurance carriers. (HHS has separate authority over governmental plans and insurance carriers.)

This policy statement gives new rule AHPs some cover to continue to operate through the end of the current plan year or contract term. However, it does not provide any protection after that time. If the DOL does not request, and receive, a stay of the original court decision while it appeals, some AHPs may experience disruption in the coverage that they offer after the end of the current plan year or contract term.

State Moves

As we have said consistently, states still have a significant regulatory role to play for AHPs. At least two states have taken action since the initial court decision. However, only one of those was in direct response to the decision.

Vermont: The Vermont Department of Financial Regulation issued a bulletin. The bulletin says that new rule AHPs can continue to serve people who are already enrolled. However, they cannot enroll anyone new and cannot market to new potential groups. Additionally, no additional AHPs can be formed under the DOL’s new rules. This restriction remains in place until the court decision is either stayed (see above) or overturned on appeal. While sensible given the court’s decision, this restriction significantly hampers the ability of AHPs to operate in Vermont.

Oklahoma: On April 30, Oklahoma amended its insurance laws to expand AHP opportunities in Oklahoma. Previously, Oklahoma law required the association offering the AHP to be in existence for at least five years, among other requirements. Under the new law, any association under the DOL's new rules (if they survive) or the DOL's old rules would no longer have to meet the five-year or other requirements. This law was introduced as a bill before the court decision, so it is not a direct reaction to the decision itself, but is a sign that Oklahoma is friendly toward AHPs.

The Takeaways

At least for now, the takeaways are not all that different than they were after the court decision:

  1. AHPs formed under the DOL’s new rule should continue to consult with counsel on next steps. Particularly in light of state moves, like Vermont’s, that could come at any time, new rule AHPs should tread carefully.
  2. As we said before, associations formed under the old DOL guidance that existed before the new rules are not affected by these moves. The DOL confirmed this in the FAQs. The new AHP rules were an additional way for AHPs to form, but the new rules did not replace the old guidance.
  3. Employers considering joining an AHP should ask whether they were formed under the old rules or the new rules, and what effect (if any) the court decision, the DOL’s new policy, and any state guidance has on the AHP.

HUB International will continue to monitor these developments and provide updates as appropriate.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.