Federal Court Strikes Down Association Health Plan Rules; DOJ Supports Federal Court Ruling Invalidating the ACA
On Dec. 14, 2018, a federal judge ruled in Texas v. Azar that the entire Affordable Care Act (ACA) is invalid due to the elimination of the individual mandate penalty in 2019. In response, on March 25, 2019, the U.S. Department of Justice (DOJ) filed a letter with the Fifth Circuit Court of Appeals agreeing with the lower court’s ruling. This means that the DOJ believes the lower court’s ruling should stand, and the ACA should be struck down as unconstitutional.
Following the ruling, however, the federal judge issued a stay and partial final judgment in the case. As a result, the ACA will remain in place pending appeal. The Department of Health and Human Services (HHS) also confirmed that it will continue administering and enforcing all aspects of the ACA.
Then, on March 28, 2019, a federal district court invalidated key parts of the Trump administration’s 2018 final rule on association health plans (AHPs). The court directed the Department of Labor (DOL) to consider how the remaining provisions of the final rule are affected by its decision.
In its ruling, the court stated that the final rule was an “end-run” around the ACA and that the DOL exceeded its authority under ERISA. The court specifically struck down two parts of the final rule:
- The provision defining “employer” to include associations of disparate employers; and
- The provision expanding membership in these associations to include working owners without employees.
Regarding the ACA, the ruling is being appealed and will likely be taken up by the Supreme Court. As a result, a final decision is not expected to be made until that time. However, despite the Administration’s support of the lower court’s ruling invalidating the ACA, the White House has announced that the ACA will continue to remain in place pending appeal.
Regarding AHPs, employers and working owners that have joined an AHP, or are thinking about doing so, should consider how these plans may be affected by the court’s ruling. According to the DOL, participants in AHPs affected by the court’s decision have a right to benefits as provided by the plan or policy, although these plans may change their rules going forward.
HHS Extends Transition Policy for Non-ACA Compliant Health Plans
On March 25, 2019, the Department of Health and Human Services (HHS) extended an existing transition policy for certain health plans that do not comply with the ACA for an additional year, to policy years beginning on or before Oct. 1, 2020.
In states that allow it, health insurance issuers have the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms that took effect in 2014. Plans renewed under this transition policy are often called “grandmothered” plans. Originally announced in 2013, the transition policy has already been extended several times.
Individuals and small businesses may be able to keep their non-ACA compliant coverage through 2020, depending on the plan or policy year. This latest extension may also mean that ACA compliance is never required for these transitional plans. If the ACA is repealed, replaced or amended, the market reforms may no longer apply to these plans.
DOL Clarifies Employer Obligation to Designate FMLA Leave
The Family and Medical Leave Act (FMLA) provides eligible employees with unpaid, job-protected leave for specified family and medical reasons. Eligible employees may take up to 12 weeks of leave (26 weeks for military caregiver leave) each year for FMLA-qualifying reasons. Because FMLA leave is unpaid, employees often request time off under another leave program, such as paid sick leave or paid time off.
An opinion letter from the Department of Labor (DOL) clarifies that employers cannot delay designating paid leave as FMLA leave, even if the employee would prefer this delay. Employers must notify employees that their leave is FMLA-protected within five days of obtaining enough information to make this determination.
Employers should be prepared to designate time off as FMLA leave and count it against employees’ annual leave entitlement in a timely manner. To identify when employees’ time off requests should be designated as FMLA leave, managers and supervisors must be able to recognize FMLA-qualifying reasons for leave.
Contact your Higginbotham representative for more information about these compliance updates.
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