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11 states sue to stop association health plans

America's Health Insurance Plans has warned that AHPs could lead to fewer insured Americans and higher premiums for those who remain in ACA market.

Susan Morse, Managing Editor

Eleven states and the District of Columbia have sued the federal government over its proposed final rule to allow for association health plans that get around the Affordable Care Act's mandate to provide essential benefits.

The states said the final rule is unlawful and want it declared invalid.

The lawsuit published by Axios was filed Thursday in the U.S. District Court for the District of Columbia, against the Department of Labor, Secretary R. Alexander Acosta and the United States. 

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In June, the Department of Labor proposed a final rule, effective August 20, that establishes more flexible criteria under ERISA, the Retirement Income Security Act, for determining when employers may join together in a group to form association health plans. AHPs expand access to affordable health coverage, especially for employees of small employers and certain self-employed individuals, according to the final rule. 

The ACA mandates that all individual and small group plans cover ten essential health benefits. Association health plans would not be subject to these consumer protections.

It would allow associations comprised of small employers and individuals to sponsor association health plans, and then treat the plans as large group plans not subject to ACA protections, the states said. The final rule's purpose is to shift, through manipulation of ERISA, a large number of small employers and individuals into the large group market.

"The rule challenged in this lawsuit is part of this Administration's broad effort to undermine the ACA," according to the lawsuit.

Consumers will have less coverage and fewer benefits that Congress intended and the rule will destabilize the individual and small group markets with premiums that may be unaffordable.

America's Health Insurance Plans warned after the rule was issued that AHPs could lead to fewer insured Americans, higher premiums for those who remain in the ACA market and could put consumers who get an AHP at risk of fraudulent action by new groups entering the field. 

The states also argued against the rule's flexibility in allowing for self-employed individuals to be both employer and employee, and in permitting employers in a geographic area who do not share a common interest to band together to form AHPs.

The states bringing the lawsuit are New York, Massachusetts, California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, Virginia, Washington and the District of Columbia.

The ACA's ten essential benefits are for ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services, laboratory services, preventive and wellness services and chronic disease management and pediatric services, including oral and vision care.

Twitter: @SusanJMorse
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