Definition of “Employer”—Association Health Plans Proposed Rule Summary

On December 20, 2023, the Employee Benefits Security Administration (EBSA) of the Department of Labor (Department) published in the Federal Register (88 FR 87968) a proposed rule entitled “Definition of ‘Employer’—Association Health Plans” (AHPs). This proposed rule would rescind the similarly titled rule finalized in 2018 (83 FR 28912). 

The 2018 AHP Rule expanded the regulatory definition of “employer” under the Employee Retirement Income Security Act of 1974 (ERISA) to include associations (1) formed by employers with substantially loosened links to each other (based on the revised definition of bona fide group or association of employers), and (2) comprised of working owners with no employees. The potential effects of the 2018 AHP Rule include, for example, that a working owner with no employees could join an association that is deemed the “employer” for purposes of an AHP and thus subject to health plan requirements for large employers, rather than the more comprehensive requirements for individual coverage. In 2019, the U.S. District Court for the District of Columbia set aside the 2018 AHP Rule’s definition of bona fide group or association of employers as well as the language permitting working owners without employees to be treated as employees for AHP purposes. The court remanded the rule back to the Department to consider the viability of the remaining provisions. Without the core provisions of the 2018 AHP Rule, the Department has decided the 2018 AHP Rule would have no operationalizable substance, providing no meaningful guidance, and proposes to rescind the 2018 AHP Rule in its entirety.

Comments on the rule are due by February 20, 2024. The Department seeks comment not only on whether to rescind the 2018 AHP rule, but also on whether it should propose a rule that:

• Codifies pre-rule guidance for group health plans (that is, the subregulatory guidance in place prior to the 2018 AHP Rule),
• Clarifies the application of the pre-rule guidance to group health plans (for example, the application to AHPs of nondiscrimination policies in Health Insurance Portability and Accountability Act of 1996 (HIPAA)), and
• Offers revised alternative criteria for multiple employer association-based group health plans.