WASHINGTON — A federal judge has struck down a small-business health insurance plan widely touted by President Donald Trump, the second setback in a week for the administration’s health care initiatives.
U.S. District Judge John D. Bates wrote in his opinion late Thursday that so-called “association health plans” were “clearly an end-run” around consumer protections required by the Obama-era Affordable Care Act.
On Wednesday, another federal judge blocked the Trump administration’s Medicaid work requirements for low-income people. The legal setbacks came as Trump unexpectedly pivoted back to health care this week, promising a new plan to replace the ACA, commonly called “Obamacare.” But many congressional Republicans don’t want to have that fight again. Democrats are gleeful, seeing a chance to shift the national conversation to one of their top issues.
Justice Department spokeswoman Kelly Laco said in a statement Friday the Trump administration disagrees with the judge’s ruling on association health plans and is “considering all available options,” including an appeal.
The plans at issue in Bates’ ruling Thursday allow groups of small businesses and sole proprietors to band together to offer lower-cost coverage that doesn’t have to include all the benefits required by “Obamacare.” The plans also can be offered across state lines, an attempt to deliver on a major Trump campaign promise.
But Bates wrote that key parts of the Trump administration’s policy are “unlawful and must be set aside” because they go against established definitions of what constitutes an employer under a decades-old federal law that governs workplace health and pension benefits.
In particular, a decision by the administration that sole proprietors can be counted both as employers and employees “stretches the statute too far,” Bates wrote.
Trump has eagerly talked up the plans, claiming they’re doing record business and promising small business owners “you’re going to save massive amounts of money and have much better health care.” But the plans don’t seem to have had a major impact. The Labor Department regulation authorizing them took effect last summer.
“There’s been a few of these that have been announced,” said Gary Claxton, an expert on employer health insurance with the nonpartisan Kaiser Family Foundation. “It hasn’t been in effect all that long.”
Claxton estimated that a few thousand people may be covered by association plans at the moment. Initial estimates said 3 million to 4 million people eventually would enroll, compared with more than 160 million Americans covered by current employer plans.
New York Attorney General Letitia James, who joined other Democratic state officials in suing the Trump administration, said the judge “saw past the Trump administration’s transparent effort to sabotage our health care system and gut these critical consumer protections in the service of its own partisan agenda.”
Many state officials see federal insurance regulation of small-business plans as infringing on their own traditional authority.
The Trump administration, unable to repeal “Obamacare” in Congress, has tried to use its rule-making powers to open up a pathway for alternatives. In the case of plans for small businesses and sole proprietors, the administration’s regulation granted them similar flexibility as enjoyed by big companies. Most large employer plans are not subject to state regulations, and the Obama health law did not make major changes to them either.
But Bates wrote that treating sole proprietors similar to major employers “creates absurd results.”
