A federal judge has ruled that two parts of the Department of Labor (DOL) rule expanding employers’ ability to join in Association Health Plans (AHPs) violate ERISA. The DOL AHP rule was formed to allow employers to band together to create health plans based on industry or geography.

The federal court opinion stated that the rule was an “end-run” around the Affordable Care Act, and that the DOL exceeded its authority when it defined “employer” in the rule to include associations of dissimilar employers. The court also struck down a part of the DOL rule that expanded memberships in AHPs to working owners without employees.

The plans at issue allow groups of small businesses and sole proprietors to band together to offer lower-cost coverage that doesn’t have to include all the benefits required by “Obamacare.” The plans also can be offered across state lines. The Judge ruled against AHPs because they go against established definitions of what constitutes an employer under federal law that governs workplace health and pension benefits. In particular, a decision that sole proprietors can be counted both as employers and employees.

The judge ruled treating sole proprietors like major employers “creates absurd results.” For example, said the judge, consider a hypothetical association of 51 sole business owners with no employees. Under the administration’s rule, they would in effect be counted as having 51 employees. Not only that, each of the 51 working owners would also be counted as an “employer” although they have “zero” people working for them. And the association also would count as an employer, for a total of 52 employers.

The Trump administration disagrees with the judge’s ruling on association health plans and is “considering all available options,” including an appeal.

EBA’s opinion is that anything that can help sole proprietors and small companies lower their health care cost is good thing. The judge made a bad ruling.


Employee Benefit Advisors provides employee benefits, tax-advantaged healthcare, compliance guidance for ACA and Health & Welfare DOL Audits, and PEO Advisory & Consulting Services.