WASHINGTON (CN) — Eleven states and the District of Columbia sued the Trump administration Labor Department on Thursday, fighting a change in healthcare benefit rules they say will allow insurers and private employers to skirt Affordable Care Act regulations such as required coverage for preexisting conditions.
States from lead plaintiff New York to California claim a June 21 rule change will open the doors for businesses to create health plans, and for insurers to offer such plans, that would otherwise run afoul of the Affordable Care Act mandates.
“One of President Trump’s primary policy goals is to dismantle the ACA,” the federal complaint states. “The rule challenged in this lawsuit is part of this administration’s broad effort to undermine the ACA.”
The states say Trump will achieve this goal through this rule change by manipulating the Employment Retirement Income Security Act (ERISA) to allow small businesses to develop cheaper plans that would lack “basic market incentives and statutory protections.”
They claim the rule change will result in less coverage and fewer benefits in all markets — individual, small group and large group — and that it could further destabilize the individual and small group markets by making premiums unaffordable for those with pre-existing conditions.
The rule change involves changing the meaning of the term “employer” in the federal employment law.
Enacted by Congress in 1974, ERISA protects employees by regulating health benefit plans and pensions. The states claim the rule change violates ERISA and unlawfully changes the definition of “employer” to a “broad range of ‘associations.’” This will allow insurance providers to deny small group applications and undermine the single risk pool intention to “spread risk across healthy and sick people in the market,” according to the 56-page complaint.
“This AHP [association health plans] Rule would destabilize insurance markets and make consumers more vulnerable to fraud and abuse,” said Virginia Attorney General Mark Herring. He called the rule change an effort to “undo critical federal consumer protections … without sufficient justification or consideration of the consequences.”
The Government Accountability Office sent a letter to leaders of both houses of Congress on July 3, which reiterated statements from the Department of Labor, such as the rule change delivering “social benefits that justify any attendant social costs” and that the “impact of this final rule on state individual and small group risk pools is highly dependent on state regulatory practices.”
The GAO said that it “lacks data to quantify the effect of the final rule on the uninsured population.”
The Department of Labor referred a request for comment to the Department of Justice, which declined comment on the lawsuit.
The states ask the court find the rule “arbitrary, capricious, or otherwise contrary to law,” vacate it, and enjoin the Department of Labor from putting any part of the rule change into effect.
The plaintiffs are New York, Massachusetts, California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, Virginia, Washington, and the District of Columbia. All are represented by the offices of their attorneys general.
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