Current Association Health Plan Contracts Safe

The Department of Labor ("DOL") has announced that it will not take action against association health plans ("AHPs") that comply with its final regulations, even though these regulations were partially overturned by a federal court in State of New York v. United States Department of Labor.

In that case, a federal district court in Washington, D.C. ruled that the regulations are an unreasonable interpretation of ERISA, which exceeds DOL's statutory authority by broadening the definition of a "bona fide association" to include self-employed working owners, and, for ACA purposes, "by expanding the definition of a large group, [thereby] eliminating the protections for small employers and self-employed individuals."

DOL says it "recognizes that many businesses and employees have obtained health coverage from AHPs in reliance on the final regulations before the district court ruling. Many of these businesses and employees have advised the Department that they are concerned that their health coverage must terminate, which will cause significant disruption. For example, new coverage would impose new deductibles and out-of-pocket maximums without giving credit for prior participant out-of-pocket expenses paid. Moreover, switching insurance can cause gaps in coverage, leaving individuals without much needed benefits for chronic diseases and emergency care until the new insurance becomes effective."

Therefore, to minimize undue consequences on employees and their families, DOL has said that employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, until the contract's term expires.

For current contracts DOL will not pursue enforcement actions against parties for potential violations stemming from actions taken before the district court's decision, as long as parties meet their responsibilities to pay health benefit claims as promised. Moreover, the DOL will not take action against existing AHPs for continuing to provide benefits to members who enrolled in good faith reliance on the AHP regulation's validity prior to the district court's order. This non-enforcement policy will also apply "through the remainder of the applicable plan year or contract term that was in force at the time of the district court's decision."

The Department of Health and Human Services has advised DOL that it too will not pursue enforcement actions during this time period.