District of Columbia Federal District Court Judge Strikes Definition of Employer Under Association Health Plans
On March 28, 2018, Federal District Court Judge John Bates blocked the new rules for Association Health Plans (AHPs) with regard to sole proprietors and self-employed individuals. The case, the State of New York v. United States Department of Labor, the judge ruled that the definition of employer violates ERISA and Affordable Care Act (ACA) provisions and are unreasonable interpretations of ERISA.
The judge wrote: “The final rule was intended and designed to end run the requirements of the ACA, but it does so only by ignoring the language and purpose of both ERISA and the ACA,”. The Department of Labor expanded access to AHPs through an ERISA regulatory change. The agency has authority over group insurance regulation through that law. The judge said this change ran counter to “Congress’s clear intent that ERISA cover benefits arising out of employment relationships.”
In the ruling, Judge Bates determined the DOLs methodology to allow an association to be formed out of two working owners without employees as a “magic trick.” He also said the “unreasonable interpretation of ERISA creates absurd results” under the ACA. The DOL has been charged with determining if any part of the final rule could still stand without the regulation’s bona fide association and working owner provisions.