On July 26, 2018, Attorney General Maura Healey joined as co-lead counsel in filing a complaint in the United States District Court for the District of Columbia seeking to overturn a U.S. Department of Labor (Department) regulation taking effect on August 20, 2018. This regulation will allow associations to market health care plans across the country that have fewer protections for insureds than those required under the Affordable Care Act.
Eleven states and District of Columbia join in a suit against the Department’s regulation
Attorney General Healey co-leads with the New York Attorney General, a coalition of states and the District of Columbia. The state plaintiffs in the suit are Massachusetts, New York, California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, and Virginia.
“This regulation is another thinly-disguised effort to destabilize our healthcare market and sabotage the Affordable Care Act,” said Attorney General Healey in announcing the filing of the suit. “We are filing this challenge to defend high-quality health coverage.”
Regulation would allow small business associations to sell non-compliant health insurance
The complaint, as filed, alleges that the Department’s regulation unlawfully expands the criteria of group health plans under the Employee Retirement Income Security Act (ERISA). The regulation would allow association health plans to qualify as large group health plans. Large groups health plans under ERISA are not subject to the core requirements of the Affordable Care Act.
The regulation will enable small employers to join together in associations formed primarily to offer insurance. These association can then offer a large group health plan if the employers in the association are in the “same trade, industry, line of business, or profession” or “have a principal place of business within a region that does not exceed the same state or the same metropolitan area (even if the metropolitan area includes more than one state).”
The Attorney Generals’ complaint argues the regulation would invite fraud, mismanagement, and deception in the health insurance market and undermine critical consumer protections provided by the Affordable Care Act.
Attorney Generals allege regulation will gut the Affordable Care Act
According to the complaint, the regulation will cause a dramatic increase in association health plans that will lack the basic market incentives and statutory protections found in the health insurance offered by large employers under ERISA.
The Attorney Generals’ complaint charges the regulation’s purpose is to permit the shifting of a large number of small employers and individuals into the large group market. However, to the Attorney Generals, the association health plans created under the regulation would lack basic market incentives and statutory protections under federal law that apply to plans from large employers. The result will be adults and children with less coverage and fewer benefits than Congress intended in all three markets (individual, small group, and large group). The regulation will also, according to the Attorney Generals, destabilize individual and small group markets with premiums that may be unaffordable for people with pre-existing conditions who need the Affordable Care Act’s core protections.
If implemented, the Attorney Generals say, the regulation’s effect would be to foster a huge increase in associations:
(1) newly formed
(2) primarily to sell health insurance
(3) for profit
(4) to all employers in the same industry or geographic area.
The Attorney Generals argue in their complaint that “Little would distinguish these entities—which are unlikely to act in their employer members’ interests—from health insurance companies or insurance brokers seeking to develop and market plans for their own profit.”
Attorney Generals ask the district court to declare the regulation invalid
The suit seeks to have the district court declare that the Department of Labor regulation exceeded its statutory jurisdiction and authority, vacate the regulation, and enjoin the Department from implementing, applying, or taking any action whatsoever under the regulation.
The district court has not set any date for a hearing on the Attorney General’s complaint.
Similar association health plan shut down by Attorney General in 2015
In her press release, the Attorney General stated she would continue to work to ensure that all Massachusetts residents get access to high-quality health care that is mandated under state and federal law and will take action to prevent the deception of consumers through association health plans.
The Attorney General also noted that in 2017, Unified Life Insurance Co., agreed to pay $2.8 million in restitution and civil penalties as a result of its deceptive and unlawful selling of short-term health insurance for sale in Massachusetts, but which it deceptively marketed through a third-party association. See Agency Checklists’ article of April 11, 2017, “Mass. AG Stops Illegal Health Insurance Sales and Recovers $2.8 Million From Insurer.”
