The U.S. Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) has issued a Notice of Proposed Rulemaking that would rescind a 2018 DOL rule entitled “Definition of Employee – Association Health Plans,” or the 2018 AHP Rule. The purpose of the rule was to expand the availability of AHPs.

Before the 2018 AHP rule, a multiple employer welfare arrangement (MEWA) typically constituted a single ERISA plan only if it was established by a “bona fide” association of employers. An association was “bona fide” only if it had a genuine organization relationship and the ability to control the association. Qualifying as a MEWA was beneficial for some individual and small group health insurance plans to avoid some Affordable Care Act (ACA) reforms.

The 2018 AHP rule redefined when an AHP could be treated as a single ERISA plan by creating a more flexible “commonality of interest” test instead of the traditional bona fide association test. As a result, working owners without common-law employees could participate in an AHP under the rule.

However, in 2019, a federal district court invalidated key portions of the 2018 AHP rule, including the “commonality of interest” test and the working owner provisions. The DOL later issued additional AHP guidance, but the status of AHPs remained unclear.

According to the DOL, the proposed rule aims to resolve the current uncertainty regarding the status of AHPs. In an accompanying news release, the DOL stated that rescinding the 2018 AHP rule would allow for a reexamination of the criteria for a group or association to constitute an AHP and to ensure that federal guidance aligns with the plain language and purposes of ERISA.

Public comments on the proposed rule are due on or before February 20, 2024. However, since the additional AHP guidance prohibited AHPs formed under the 2018 AHP rule from signing up new members, rescission of the rule is likely to have no practical effect on most AHPs.