Association health insurance plans in Vermont must stop marketing and cannot enroll new employers due to uncertainty in the wake of a federal court decision, the state’s Department of Financial Regulation says.
The department’s new bulletin also says the state won’t approve any new association plans until the federal court ruling, which labeled association plans an “end-run” around the Affordable Care Act, is either stayed due to appeal or vacated.
But officials emphasized that current association customers still have coverage because “insurers must honor existing (association health plan) policies and pay valid claims.”
“We obviously don’t want people to lose their health insurance. That’s the most important thing,” said Mike Pieciak, Vermont’s commissioner of financial regulation.
President Donald Trump’s administration last year issued new rules expanding association health plans, which cater to small businesses. The objective, officials said, was to give business owners and entrepreneurs access to more affordable health care options.
In response to concerns about inadequate regulation for association health plans, Vermont officials crafted new rules that say, among other things, that association plans must cover all of the “essential health benefits” in federal law. Operating under that regulatory framework, two organizations began offering association plans this year and have insured about 5,000 people.
But the road has been rocky for association health plan providers.
First, state lawmakers declined to endorse the Department of Financial Regulation’s association rules and have pursued stronger measures: The House has passed a bill that would remove a critical regulatory and financial advantage for association plans.
Now, there’s uncertainty at the federal level due to a March 28 U.S. District Court ruling in which a judge found that the U.S. Department of Labor exceeded its authority in expanding association plans last year.
Officials at the federal Department of Labor have said they disagree with the court ruling and are “considering all available options in consultation with the Department of Justice including the possibility of appealing the District Court’s decision.”
But that hasn’t happened yet, and the new Department of Financial Regulation bulletin attempts to fill that vacuum with guidance for association health plans while the court case is being sorted out.
The bulletin, signed by Pieciak, says the department “lacks a legal basis on which to approve” any new association plans until there are new developments in the federal court case. That could include the Department of Labor asking for a stay of the court’s order during an appeal.
Additionally, the bulletin says existing association health plans “do not have the authority to enroll new employer groups or market coverage to potential new groups.” Those who offer association coverage “shall post a public-facing notice prominently on their websites stating that new groups cannot be accepted until this bulletin is rescinded or superseded,” the document says.
In an interview, Pieciak said the prohibition on association plan expansion applies to adding new employers. However, a new employee taking a job with a business that’s already in an association health plan would be allowed to obtain coverage, he said.
The department’s bulletin also says officials are “developing a plan to address potential changes at the federal level to ensure that coverage provided by (association health plans) to small businesses is not disrupted.”
Pieciak said that planning will consider all possibilities, including the federal Department of Labor potentially going back to the drawing board to come up with new association plan rules.
It all adds up to a lot of uncertainty for those who administer association health plans. But Christine Oliver, who is an adviser to one of the groups offering the plans in Vermont, says the department’s bulletin doesn’t have much immediate impact.
For one thing, Oliver – who consults for South Burlington-based Business Resource Services – says new enrollment in association plans happens during the standard open-enrollment period at the end of the year.
Also, Oliver said there’s little marketing happening at the moment. “We’ll just make sure none of that’s out there,” she said.
Betsy Bishop, president of the Vermont Chamber of Commerce – the other organization offering association plans — also sought to reassure current policyholders.
“We will certainly comply with the (department) order, which will not interrupt health coverage for anyone on (chamber) health insurance,” Bishop said.
Mike Fisher, the chief health care advocate for Vermont Legal Aid and a consistent critic of association health plans, said he appreciates that the Department of Financial Regulation “recognized the immediate impact of the court decision on Vermont.”
Fisher also said the court ruling shows that the Trump administration’s expansion of association plans “is designed to be an end-run around the Affordable Care Act. It’s purpose is to undermine the marketplace.”
“I very much hope that the Vermont Senate recognizes that and takes appropriate action,” Fisher said.
That’s a reference to the House bill, H.524, that would cripple association plans. The bill is now in the Senate Finance Committee, where several businesses testified on Tuesday about the importance of association health plans to their employees.
Both Oliver and Bishop have said the regulations in H.524 would hurt small businesses and wouldn’t address the state’s health care affordability problem.
All of the regulatory uncertainty isn’t impacting the day-to-day coverage of people currently enrolled in association plans, Oliver said. But for those administering and developing the plans, “it does leave you in a little bit of a wait-and-see mode,” she said.
