Judges Strike Down Association Health Plans, Medicaid Work Requirements

March 29, 2019 - Several federal judges have decided that a number of signature Trump Administration health insurance policies cannot stand.

Judges have nixed key efforts to expand the sale of association health plans (AHPs) and implement Medicaid work requirements in a handful of states, representing a major setback for the Administration’s view for the nation’s health insurance landscape.

In the District Court of Columbia, Judge John Bates ruled that the Department of Labor’s attempt to expand the sale of AHPs is not consistent with current law.

The new AHP rules, which follow a 2017 executive order, allow loose conglomerations of workers to sign up for a single AHP plan no matter their geographical location – a departure from long-established interpretations of what constitutes an “association,” said Bates in his decision.

The novel approach contradicts provisions included in both the Affordable Care Act and ERISA, Bates contends.

READ MORE: Trump Administration Backs Scrapping Entire Affordable Care Act

“ERISA governs employee benefit plans arising from employment relationships,” the judge explained. “It provides that some employer associations acting ‘in the interest of’ employer members are sufficiently employer-like to fall within the statute’s scope. Health plans offered by these associations may qualify as single ERISA plans, a designation that confers regulatory advantages under the ACA.”

Under the new AHP final rule issued in 2018, almost any entity can now be considered sufficiently association-like to qualify as ERISA entities. 

And thanks to a CMS rule extending the duration of AHPs and other short-term limited duration insurance (STLDI) products, consumers can keep these plans long past their intended shelf life.

“The [DOL] Final Rule allows virtually any association of disparate employers connected by geographic proximity to qualify as single ERISA plans. These associations no longer have to be viable apart from offering an association health plan and may form solely for the purpose of creating an AHP,” Bates said.

As a result, practically any group of individuals can join an association health plan – a type of insurance offering that does not need to meet the consumer protection thresholds of the ACA. 

READ MORE: 11.4M Consumers Selected ACA Health Insurance Exchange Plans in 2019

 “The Final Rule is clearly an end-run around the ACA. Indeed, as the President directed, and the Secretary of Labor confirmed, the Final Rule was designed to expand access to AHPs in order to avoid the most stringent requirements of the ACA,” Bates asserted.

“In short, the Final Rule exceeds the statutory authority delegated by Congress in ERISA.”

A coalition of Democratic attorneys general brought the suit against the Department of Labor, led by Barbara Underwood of New York and Maura Healey of Massachusetts. 

The ruling is particularly interesting in light of a concurrent court case challenging Congress’ authority to implement the ACA itself – a case led by AGs on the other side of the political divide. 

In December, US District Judge Reed O'Connor ruled that Congress overreached itself by authoring and passing the Affordable Care Act to begin with, due primarily to the inclusion of the individual mandate to purchase health insurance.

READ MORE: Congress Opens Probe into Short-Term Limited Duration Insurance

O’Connor asserts that if one part of a law is deemed inviable, then every other component of the law must be similarly removed from statute.

The Trump Administration recently voiced its full support of this position, but will no doubt take issue with Bates’ ruling that Trump’s executive order and subsequent action by the DOL was also an overreach of authority.

The decision on association health plans comes just one day after yet another judge struck down Medicaid work requirements in Arkansas and Kentucky. 

Republican lawmakers have argued that pinning Medicaid eligibility on “community engagement” requirements will reduce reliance on safety net programs, prevent benefits fraud, and help individuals achieve more financial independence.

In Arkansas, more than 18,000 people have lost their health insurance coverage due to the work requirements introduced by lawmakers.

Judge James E. Boasberg of the Federal District Court for the District of Columbia ruled that Kentucky and Arkansas failed to provide sufficient evidence that work requirements would save money for their states, help individuals move from Medicaid to commercial insurance coverage, or continue to support the fundamental mission of Medicaid as a safety net program.

This is the second time Kentucky’s work requirements have been struck down – both times by the same judge.

Fifteen states have applied for Medicaid demonstration waivers that include some form of community engagement requirement.  Five waivers have been approved but not implemented, and three – in New Hampshire, Arkansas, and Indiana – are currently in operation. 

Kentucky’s work requirements were approved but have not yet been put into action due to the lawsuits over their legality.

There is no question that all of the recent rulings are somewhat partisan in nature, and may reflect the political alignment of some of the judges as much as anything else. 

Almost every decision is likely to be appealed to higher courts, and the Affordable Care Act will remain a cornerstone issue of the 2020 election cycle.  With a deeply divided Congress and an administration that has made no bones about its opposition to every aspect of the ACA, the state of the health insurance industry as a whole will be very much up in the air for the foreseeable future.