Association health plan ruling puts some companies in limbo

A federal judge's ruling against a type of health insurance plan designed for small business owners has some companies now thinking about what to do next.

The plans known as association health plans allowed sole proprietors and other business owners to band together to buy insurance at reduced rates. The attorneys general in 11 states and the District of Columbia successfully argued that the plans, part of a Trump administration policy, violated the Obama-era Affordable Care Act. U.S. District Judge John D. Bates said late Friday the plans were "clearly an end-run" around ACA provisions aimed at protecting consumers.

Rules allowing association health plans began going into effect less than six months ago, and according to the Kaiser Family Foundation, which studies trends in health care, only a few plans have been announced. Those that have been set up are now in limbo — a Justice Department spokeswoman said after Bates' ruling that the administration is "considering all available options," including an appeal.

One plan dealing with the uncertainty is run by the Nebraska Farm Bureau, which began enrolling members Oct. 1. Bureau officials did not immediately know what the impact of Bates' ruling would be on their plan, said Rob Robertson, the bureau's chief administrator.

Owners who are in or hoped to join plans have options for buying individual insurance including health insurance exchanges and buying policies from carriers.

Bates said the rules allow sole proprietors to be counted both as employees as well as employers, a decision he said goes against established definitions under the Employee Retirement Income Security Act of 1974, known as ERISA. The act governs minimum standards for company retirement and health plans.

Association health plans also have faced opposition at the state level. The Trump administration rules did not seek to supersede state laws regulating health insurance, and some states have limited the ability of companies to join the plans.

Aside from the legal issues about the plans, there were concerns that if they became insolvent, as some did in the past, policyholders could be stuck with medical bills. Another fear is that some new plans could be scams, also repeating the past. In 2004, the U.S. Government Accountability Office reported that there were 144 plans that weren't authorized to sell health insurance between 2000 and 2002; these scams covered more than 200,000 policyholders and left over $250 million in unpaid medical claims.


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