Sole proprietors are generally individuals who own and operate their own businesses without any employees.
Judge Bates wrote that, in the regulation, the Department of Labor “stretches the definition of employer” beyond what federal law allows. The rule was designed to increase access to plans that “avoid the most stringent requirements” of the ACA.
The opinion by Judge Bates, who was appointed by President George W. Bush, is widely expected to be appealed, although the government has not yet done so.
The decision affects one pillar of a broader effort by the Trump administration to expand access to less expensive health insurance. Association plans have long been a favorite of Republicans, existing before the ACA. Supporters say they are one way to pool groups of businesses together to get better premium rates.
Still, some plans faced problems in the past, including bankruptcy or complaints that they misled consumers by not fully informing them about what is covered.
After the ACA took effect, enrollment fell, partly because many small businesses were buying new ACA plans and many existing association plans had to comply with ACA rules for small-group coverage anyway. People who ran their own businesses and had no employees qualified only for coverage through the ACA’s individual market.
But the Trump administration in June broadened the definition of those eligible to buy insurance through employer-based associations to include sole proprietors and also made it easier to form associations to offer coverage.
In addition, the changes allowed more association plans to be classified as large-employer coverage, which exempts them from some of the ACA’s requirements. For example, association plans don’t have to include all 10 of the ACA’s “essential” health benefits, such as mental health care and prescription drug coverage.
Also, unlike ACA plans, association insurers can set premium rates based on an employer’s industry, as well as taking into account the age range and gender makeup of their workforce.
In other words, association plans can charge less for companies with workforces that are generally younger and male in occupations that involve mainly desk work than for firms with mostly older workers or companies doing riskier work, such as cutting down trees or roofing.
Still, such plans must abide by other ACA provisions, including accepting people with preexisting medical conditions.
Critics, including the states that sued, say the new rules and other administration-backed changes will weaken the market for ACA plans by drawing out younger and healthier people. The states also argued that the new rules would be costly for them to administer, alleging they would have to devote more resources to preventing consumer fraud.
In Michigan, Mr. Lyon said the association his group formed, called Transcend, offers coverage to small employers and sole proprietors that is just as generous as large-group plans. It is a fully insured plan through the state’s Blue Cross Blue Shield carrier that covers a broad array of benefits, except children’s dental and vision.
“One thing we don’t want to do is sell a bag of air to our members,” said Mr. Lyon.
While some new members have reported large savings by enrolling, Mr. Lyon said association plans are not necessarily less expensive than small-group coverage. It all depends on the demographic and occupational makeup of the small business, he said.
“Our best estimate was association health plans would be the right solution for 30%-35% of the small-group world,” said Mr. Lyon. “It all has to come together. Age matters. Gender matters. It’s so specific to each company.”
Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.