(CN) – A federal judge ruled late Thursday that the Trump administration’s attempt to expand health plans that don’t adhere to the coverage rules of the Affordable Care Act was illegal and “clearly an end-run” around the law.
U.S. District Judge John Bates, a George W. Bush appointee in Washington, D.C., blocked the Trump administration’s new rules regarding “Association Health Plans,” which would give small businesses the ability to band together to offer their employees cheaper plans that also provide fewer health benefits than the ACA requires.
“The final rule is clearly an end-run around the ACA,” Bates wrote in his 43-page ruling. “Indeed, as the president directed, and the secretary of labor confirmed, the final rule was designed to expand access to AHPs to avoid the most stringent requirements of the ACA.”
Bates said the Trump administration’s efforts to promote the association health plans violates both the ACA and the Employee Retirement Income Security Act, a 1974 law that helped define modern employer-sponsored health care.
Bates said “the final rule does violence to ERISA” and “creates absurd results under the ACA” by stretching the definitions of employer and employee.
Bates noted the rule would treat two business owners with no employees as employers and employees, and would allow a group of 51 working owners who employ no one to be treated as an association with 52 employers and 51 employees.
That definition would qualify the association as a large employer that is exempted from the Affordable Care Act’s requirements.
“The court cannot believe that Congress crafted the ACA, with its careful statutory scheme distinguishing rules that apply to individuals, small employers, and large employers, with the intent that fifty-one distinct individuals employing no others could exempt themselves from the individual market’s requirements by loosely affiliating through a so-called ‘bona fide association’ without real employment ties,” the ruling says.
This amounts to “a magic trick,” Bates said, and “relies on a tortured reading” of the law.
Bates concluded that the Department of Labor unreasonably interpreted both the ERISA and the ACA.
“The Final Rule’s provisions defining ‘employer’ to include associations of disparate employers and expanding membership in these associations to include working owners without employees are unlawful and must be set aside,” Bates said.
Department of Justice spokeswoman Kelly Laco expressed sharp disagreement with the court’s opinion.
“We disagree with the District Court’s ruling and are considering all available options,” Laco said in an email. “The administration will continue to fight for sole proprietors and small businesses so that they can have the freedom to band together to obtain more affordable, quality health care coverage. The Association Health Plan rule opened health care options for dozens of associations representing thousands of small businesses and sole proprietors and provided them with access to the same type of affordable healthcare options offered by other employers.”
California Attorney General Xavier Becerra, who has filed several lawsuits against the Trump administration, took to Twitter Thursday night to celebrate the decision.
“The rule of law prevailed yet again against the Trump Administration — today in the name of preventing employers from getting a free pass to offer barebones #healthcare coverage,” Becerra tweeted. “Proud to stand with the states that fought for this.”
New York Attorney General Letitia James also celebrated the ruling late Thursday.
“Today’s ruling is a win for the New Yorkers and Americans who seek access to quality, affordable health care in this country,” James said in a statement. “We are pleased that the District Court saw past the Trump administration’s transparent effort to sabotage our healthcare system, and gut these critical consumer protections in the service of its own partisan agenda. This victory will help ensure better health care for millions nationwide.”
Attorneys general from 11 states and the District of Columbia filed the lawsuit in July last year.
The Trump administration had rolled out the plans after President Trump signed an executive order directing Labor Secretary Alexander Acosta to consider allowing more small employers to form association health plans.
The Congressional Budget Office had determined the rule would result in 4 million more people enrolling in the plans, but had said those enrolling would likely be healthier than those enrolled in plans that comply with the Affordable Care Act.
The CBO also said it could cause a 2-3 percent spike in premiums for those left behind in the Affordable Care Act markets.
The rule allowed plans to be exempt from covering essential health benefits required by the ACA, like mental health services, maternity care and emergency services.
The defeat for the Trump administration comes just one day after U.S. District Judge James Boasberg blocked the administration from adding work requirements for some Medicaid recipients in Kentucky and Arkansas in a ruling released on Wednesday.