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AG Derek Schmidt: Expanding association health plan options is lawful

Release Date: Jun 13, 2019

TOPEKA – (June 13, 2019) – A change in federal regulations that allows more options in the health-care marketplace is lawful, Kansas Attorney General Derek Schmidt has told a federal appeals court.

In June 2018, the U.S. Department of Labor relaxed Obama-era federal restrictions to allow broader use of association health plans by individuals and small businesses in states that allow them. Several states, led by New York, challenged the relaxed regulation in federal district court, and obtained a judgment in March that the changes were unlawfully implemented. The U.S. Department of Justice appealed.

Schmidt, along with 13 other state attorneys general, the Governor of Mississippi and the Governor of Kentucky, filed a legal brief last week arguing the relaxed regulation is lawful.

"The States have an obvious interest in the health insurance market and in the health care options available to their citizens," the attorneys general wrote. "The Department of Labor’s rule regarding Association Health Plans (AHPs) thus implicates those interests by expanding health insurance options for workers. AHPs work to reduce the cost of health care coverage for the employers who would otherwise be too small to take advantage of the increased bargaining power vis-a-vis hospitals, doctors, and pharmacy benefit providers on which large groups rely."

The attorneys general argue courts have consistently held as long as a federal agency’s change of position from one presidential administration to the next wasn’t arbitrary and capricious, the reversal is a valid exercise of executive authority.

Schmidt noted that Kansas law allows for a variety of association health plans and similar options, including new legislation signed into law earlier this year that permits a different type of lower-cost health coverage for Kansas farmers and ranchers.

The case is New York v. United States Department of Labor, No. 18-CV-1747. A copy of the states’ brief is available at https://bit.ly/2Zoyob2.

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