Court ruling scuttles Chamber plans for insurance association

April 10-- Apr. 10--The Alaska Chamber was just a few weeks away from opening enrollment to new health insurance options for small employers in the state when a D.C. District Court ruling changed those plans.

Alaska Chamber Vice President Albert Fogle said the business group had pegged May 1 to start enrolling small businesses and nonprofits in its association health plan. That was before D.C. District Judge John D. Bates on March 28 struck down a 2018 federal Labor Department rule that expanded the ability for small employers to band together to purchase health insurance for their workers.

"We were real close and if we were still a 'go' today I would be doing our first road show presentation and I would've been on the road all the month of April and into May going to all the local chambers and giving speeches about the Alaska Chamber health plan," Fogle said during an April 8 interview.

Association health plan advocates see pooling small employers into large groups as a way to take control over the health insurance plans offered to workers at organizations with less than 50 employees, provide more insurance options and possibly reduce costs in the typically higher-cost small group and individual insurance markets under the Affordable Care Act.

However, Judge Bates threw out the rule because it greatly exaggerated the definitions of "employer" and "employee" under the 1974 Employee Retirement Income Security Act, or ERISA, and the ACA, according to his 43-page decision.

Labor Department officials generated the rule, which was finalized in August 2018, in response to an October 2017 executive order from President Donald Trump directing the agency to expand options for developing such association health insurance plans.

The executive order nearly immediately led to the development of about 35 such association health plans, many of which were sponsored by chambers of commerce or similar business groups, according to an Alaska Chamber statement. The U.S. Chamber of Commerce estimates more than 300,000 individuals would have enrolled in association plans nationwide if not for the court ruling.

Eleven states and the District of Columbia quickly joined together to sue the Labor Department over the rule, contending it is another attempt by the Republican administration to undermine the ACA and its consumer protections.

The Labor Department association health plan rule allows nearly any group of disparate employers to qualify for a single health plan under the ERISA, which reversed the department's decades-long precedent of requiring such associations to have members with "close economic and representational ties" to qualify as employers under the law, according to Bates.

The ERISA is the key in the case because it is the primary federal law covering employee benefit plans.

Bates concluded that the Labor rule, which allows sole proprietors to join together and form an association plan, goes far beyond Congress' definitions of "employer" and "employee" under ERISA. He wrote that under the rule 51 sole proprietors could form an association that would actually have 52 employers -- counting the association as one employer -- and 51 employees.

"This logic is clever but ultimately not persuasive," Bates wrote, further explaining the rather convoluted counting. "When one counts the employees employed by two self-employed persons without employees, the sum is zero. (Labor's) feat of prestidigitation transforms two individuals, neither of whom works for the other, into a total of three employers and two employees. This interpretation strains the ERISA definition of 'employee,' which contemplates an individual 'employed by' another."

Before Bates handed down his decision, which remanded the rule back to the Labor Department for analysis and possible revision, the Alaska Chamber was getting loads of interest from small employers in Alaska, according to Fogle.

"We all have been receiving daily inquiries from multiple employers asking when this is coming online; when they're going to be able to see plans," he said. "People were looking for a different option because the plans that are in the small group market are what they are."

Chamber leaders had been working with a consultant on the association plan since 2017 and the Labor rule just made the process easier, he added.

The Alaska Chamber had an internal goal of signing up 1,000 individuals in the first year of the plan, as that would give the plan a large enough pool to be independently rated by insurers.

The expected benefits of the Chamber's association plan went beyond cost for many prospective members, according to Fogle. He said a comparison of the plan against existing small group insurance offerings in Alaska found that the Chamber's plan would have kept premiums flat or lowered them for about 60 percent of participants. He stressed, however, that it would have had benefit enhancements offered at lower cost shares for employees.

The Chamber's plan offered a traditional range of low, medium and high deductible insurance plans, but also included, among other benefits, vision and "COBRA" coverage, which allows workers to continue receiving health insurance for a period after they are no longer employed.

The COBRA benefit was particularly appealing to employers with less than 20 employees, Fogle said, adding that the insurance plan was fully compliant with the ACA.

"To me, those are the benefits that go all the way down to the individual employee level, where families and individuals are having a lower out-of-pocket," he said.

The Alaska Chamber is now working to put together a revised association plan that is compliant with Bates' decision.

"We certainly have encouraged the Department of Justice to file the appeal and ask for a stay in the decision by the judge who issued the ruling until there's finality on this decision but other than that, my main focus has been to find a way that we can do this under the current ruling and find a path forward," said Fogle, who was about to go into a meeting on that topic.

Elwood Brehmer can be reached at [email protected].

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