On March 28, 2019, a federal district court struck down core provisions of the Department of Labor (DOL)’s association health plan (AHP) rules in a lawsuit filed by 11 states and the District of Columbia challenging the validity of the rules.

The AHP rules attempt to expand the definition of “employer” under the Employee Retirement Income Security Act of 1974 (ERISA) so that small employers can band together to purchase medical insurance in the large group market, rather than the individual and small group markets.  The distinction is significant because medical insurance in the individual and small group markets is subject to certain mandates under the Affordable Care Act (ACA), such as the requirement to provide “essential health benefits,” while medical insurance in the large group market is not.  For more information about the AHP rules, please see “Association Health Plans Reinvigorated-New Options for Many Employers.”

In its opinion invalidating the most significant provisions of the AHP rules, the court explained that the rules improperly attempt to circumvent the ACA and rewrite ERISA’s statutory definition of “employer.”  At this time, the DOL has yet to file an appeal and has been ordered to consider whether any other provisions of the AHP rules can survive in light of the court’s decision.

For more information and guidance, please contact your Executive Compensation and Employee Benefits Counsel at Smith, Gambrell & Russell.