Democratic-Led States Sue Trump Administration Over Association Health Plans

Eleven states and the District of Columbia are suing the Trump administration, alleging that the Department of Labor (DOL) violated the Administrative Procedures Act when it promulgated the rule expanding association health plans (AHPs).

AHPs, sold by small businesses and self-employed individuals that band together, do not meet the standards set forth by the Affordable Care Act (ACA). The administration, which has vowed to undo the ACA, expanded the criteria for forming AHPs and is promoting the plans as a way to afford health insurance, but critics say that the coverage is not as broad and can leave consumers with unexpected medical bills.

The suit, filed Thursday in the United States District Court for the District of Columbia, is being led by New York Attorney General Barbara D. Underwood and Massachusetts Attorney General Maura Healey, both Democrats. The coalition includes other Attorneys General from other Democratic-led states and DC: California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.

A statement from Underwood’s office said that the plans “have a long history of fraud, mismanagement, and abuse, with millions in unpaid claims for policyholders and providers, often leading to consumer bankruptcies.”

The Attorneys General are urging that the AHP rule be vacated. The 64-page lawsuit also argues that the AHP rule violates both the ACA and the Employment Retirement Income Security Act (ERISA) and that it “unlawfully reverses decades of agency and judicial interpretation of ERISA’s key terms, with the primary purpose of undermining the ACA and without accounting for increased risk of fraud and harm to consumers based on a longstanding history of such conduct by similar plans.”

“The Trump administration’s AHP Rule is nothing more than an unlawful end run around the consumer protections enshrined in the Affordable Care Act — part of President Trump’s continued efforts to sabotage our health care system,” said Underwood. “Our lawsuit today seeks to safeguard federal protections under the ACA that help guarantee access to quality, affordable health care.”

The lawsuit argues that Congress has long sought to protect consumers from fraudulent conduct in the health insurance marketplace, with the ACA being the centerpiece of that intent. AHPs allow higher premiums or fewer benefits based on a pre-existing condition, and the lawsuit says the rule “would undo critical federal consumer protections and unduly expand access to AHPs without sufficient justification or consideration of the consequences.”

Under the new rule, AHPs can serve employers in a state or employers in the same industry across state lines. According to the DOL, the new rule provides more choice and will make health insurance more affordable.

The percentage of those younger than 65 years who are uninsured is expected to rise in the coming years as a result of the changes to the ACA since the beginning of 2017, when President Donald Trump took office. The Congressional Budget Office and the Joint Committee on Taxation has said the percentage of those who are uninsured will rise from 11% in 2018 to 13% by 2028.

This month, CMS also directed that AHPs and short-term plans be included in any marketing outreach efforts that have previously included only ACA marketplace plans.