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Coalition Sues Trump Administration Over Association Health Plan Regs

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New York state Attorney General Barbara Underwood filed a lawsuit against the U.S. Department of Labor on Thursday over an effort by the Trump administration she said is aimed at hampering the administration of the Affordable Care Act (ACA).

Underwood, leading a coalition of 12 state attorneys general, wants the department to reverse a rule allowing small businesses and self-employed individuals to collectively participate in an “association health plan” (AHP), or multi-state, multi-employer health plan.

In the past, employers could join single-state AHPs, but not multi-state AHPs.

The Trump administration promulgated the rule in June, saying the AHP program could help employers save money on health benefits. The new AHP regulations could help employers provide health coverage without complying with all ACA coverage requirements.

“You’re going to save massive amounts of money and have much better health care,” Trump said in June.

(Related: Trump’s Association Health Plans Will Be Like Big Employer Plans: DOL)

The attorney general coalition is arguing the opposite. They say the AHP rule will cause many relatively low-risk employers to leave the traditional health insurance market. That would drive up the cost of health coverage for the employers that stay in the traditional health insurance market, the coalition says.

“The Trump administration’s AHP Rule is nothing more than an unlawful end run around the consumer protections enshrined in the Affordable Care Act — part of President Trump’s continued efforts to sabotage our health care system,” Underwood said in a statement about the suit. “Our lawsuit today seeks to safeguard federal protections under the ACA that help guarantee access to quality, affordable health care.”

The ACA provides different benefits and underwriting rules for small employers’ health plans than for large employers’ plans.

Letting small groups define themselves as being a part of a large group would keep small employers, and those employers’ employees, from coming under the small-group rules, and that would go against the intentions of the ACA drafters, the coalition says.

The rule would also allow self-employed individuals with no other employees to define themselves as both the employers and the employees.

The 12-state coalition says that provision contradicts the definition of group health plans under the Employee Retirement Income Security Act of 1974 (ERISA).

The states also say the breadth of an AHP under the new rule conflicts with the traditional ERISA “common interest” test.

In the past, the commonality of interest standard required the employers joining an AHP to show they had many similarities.  The new rule allows businesses in the same industry, state or metropolitan area to form a plan. That definition contradicts the intent of ERISA, the states say.

The Labor Department has said that it has the statutory authority to promulgate the new rule because Congress gave the agency power to implement the ERISA, according to the lawsuit.

The states say the department has exceeded its statutory authority.

“DOL is exploiting its regulatory authority at the request of the president to circumvent Congress, which has repeatedly refused to amend the law to authorize the expansion of AHPs,” the coalition says. “DOL is effectively legislating changes to the ACA’s carefully considered market structures in defiance of Congress in order to undermine the ACA’s robust consumer protections.”

The coalition concludes by asserting that the Trump administration did not consider the “rampant fraud and abuse” that has accompanied past association health plans, and that the rule goes against legal precedent as well as legislative intent.

Underwood and Massachusetts Attorney General Maura Healey are co-leading the lawsuit. The coalition also includes attorneys general from California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, Virginia, Washington state and the District of Columbia.

The Department of Labor deferred to the U.S. Department of Justice for comment. The DOJ declined comment. The rule is scheduled to take effect Aug. 20.

— Read Can Trump’s Association Health Plans Be Nice AND Strong?on ThinkAdvisor.

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