ACA News & Publications

ACA Pathways: DOL Publishes Q&A Regarding Court Decision Striking Down Association Health Plan Rules

April 03, 2019

The Department of Labor (DOL) published a series of questions and answers (Q&As) intended to address questions that may arise in relation to last week's decision by the District Court to invalidate parts of the Trump administration's 2018 final rule on association health plans. On March 28, 2019, a federal judge ruled that parts of this rule were invalid. The full responses can be found here: AHP Questions & Answers.

The court ruling stated the DOL exceeded its authority under ERISA and directed it to reconsider how the remaining provisions of the final rule are affected; also stating that the final rule was an "end-run" to the Affordable Care Act (ACA). The court specifically struck down two parts of the rule:
  • The provision defining "employer" to include associations of disparate employers; and
  • The provision expanding membership in these associations to include working owners without employees.


Association Health Plan - a type of ERISA-covered group health plan that is sponsored by a group or association of employers (instead of a single employer) to provide health coverage to employees of the plan's members.

Under ERISA, an association health plan is both a group health plan and a multiple employer welfare arrangement (MEWA). MEWAs, and thus, association health plans, can be created as fully insured or self-funded or partially self-funded benefit programs. They are subject to both federal and state oversight, regardless of how they are funded.

2018 Final Rule

On June 21, 2018, the DOL published a final rule that allowed more employer groups and associations to join together as a single group to purchase health coverage. The final rule allows association health plans to offer coverage to some or all employers in a state, city, county or multistate metro area, or to businesses in a common trade, industry, line of business or profession in any area, including nationwide. The final rule became applicable to fully insured association health plans on September 1, 2018, and to existing self-insured plans on January 1, 2019. The rules were set to become effective April 1, 2019, to newly created self-insured association health plans.

The Court's Ruling

After the final rule was issued, 11 states and the District of Columbia sued the DOL, claiming that the final rule's interpretation of the definition of "employer" in ERISA was unlawful. The court agreed and vacated the relevant portions of the final rule.

The court noted that, because the ACA defines terms key to its implementation-including "employer" and "employee"-according to the definition of these terms in ERISA, the final rule was intended to expand association health plans in a way that allows small businesses and some individuals to avoid the health care market requirements imposed by the ACA.

As stated by the court, the final rule's definition allowed 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 association health plan. In addition, the final rule brings sole proprietors without any employees within ERISA's scope by counting them as both "employers" and "employees."

The court ruled that the bona fide association and working owner provisions of the final rule were unreasonable interpretations of ERISA and must be vacated. Under the final rule's severability provision, the remainder of the rule is still valid. However, the court has directed the DOL to reconsider how the rest of the rule is affected by its ruling.

Impact For California Employers

California has a long history of being wary of MEWAs for justifiable reasons, including litigation involving MEWA fiscal insolvency, the inability to pay consumer claims, and allegations of fraud. As a result, legislation was passed that required all MEWAs to file applications for certificates of compliance with the California Division of Insurance by November 30, 1995, or cease operating in California. So California law prohibits the formation of any new MEWAS. Because the final rule recognizes continued state regulation of MEWAs, California law must still be taken into consideration. Accordingly, after the final rules were issued, the State passed legislation (S.B. 1375) to specifically exclude sole proprietors, partners, and their spouses from being defined as "employees."

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits

Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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