On April 29, 2019, the DOL issued a policy statement and news release in response to a March 2019 federal district court decision vacating the DOL's association health plan (AHP) final regulations (see Practice Note, Association Health Plans and Legal Update, Federal Judge Vacates Association Health Plan Provisions as Unreasonable Under ERISA). The DOL news release announces an appeal of the district court ruling by the Department of Justice (DOJ). In addition, DOL indicated that it will not – for a limited transition period – pursue enforcement actions against employers and other parties that took steps in good faith reliance on the AHP final regulations before the district court's decision.

The DOL developed its AHP final regulations in response to a 2017 Trump Administration executive order calling for greater access to AHPs, including by expanding the then-existing DOL commonality of interest standards interpreting the meaning of "employer" under the Employee Retirement Income Security Act of 1974 (ERISA) (Executive Order 13813 (Oct. 17, 2017); see Legal Update, Trump Administration Calls for Expanded Use of Health Reimbursement Arrangements). The DOL issued AHP proposed regulations in January 2018 and finalized those rules in June 2018 (83 Fed. Reg. 28912 (June 21, 2018); see Legal Updates, DOL Proposed Association Health Plan Rules Would Expand Coverage Options for Small Employers and DOL Final Association Health Plan Rules Expand Coverage Options for Small Employers). The AHP final regulations permit employers in the small group health insurance market to form an association enabling them to buy insurance in the large group market, where they are subject to less regulation.

Under the DOL's April 29, 2019 policy, the DOL will not pursue enforcement actions against:

The DOL's nonenforcement policy will apply for existing AHPs until their current plan year or contract term expires.

In announcing this policy, DOL was advised by the Department of Health and Human Services (HHS) that employers in an insured AHP have an independent right under the guaranteed renewability provision of the Public Health Service Act (PHSA) to continue insurance coverage through the end of the applicable plan year, unless an exception applies (PHSA § 2703 (42 U.S.C. § 300gg-2); see Practice Note, Grandfathered Health Plans Under the ACA: ACA Provisions That Apply to Grandfathered Plans).

Though limited in duration, the DOL and HHS nonenforcement policies announced in this guidance will provide some relief – particularly to small employers and sole proprietors that may have obtained health coverage in reliance on the AHP final regulations before the district court decision vacating those regulations. Without the DOL and HHS nonenforcement policies, these entities faced significant uncertainty in the short-term regarding their compliance obligations under the AHP coverage. But with the AHP final regulations now the subject of an appellate court appeal, there will continue to be uncertainty in this space for the immediate future. Small employers and other entities will need to closely monitor future developments regarding the AHP final regulations as they develop an approach for subsequent plan years or contract terms.