President Donald Trump talks with reporters before boarding Marine One on the South Lawn of the White House in Washington. Trump has been dealt a second setback in a week for his administration's health care initiatives. A federal judge in Washington, D.C., on Thursday struck down a small-business health insurance plan widely touted by Trump after another judge on Wednesday blocked Medicaid work requirements for low-income people. Trump has hailed the small-business plan as a big success, but its impact is difficult to measure. (AP Photo/Susan Walsh)

Judge blocks Trump's small-business health insurance plan

March 29, 2019 - 11:28 am

WASHINGTON (AP) — A federal judge has struck down a small-business health insurance plan widely touted by President Donald Trump, the second setback in a week for the administration's health care initiatives.

U.S. District Judge John D. Bates wrote in his opinion late Thursday that so-called "association health plans" were "clearly an end-run" around consumer protections required by the Obama-era Affordable Care Act.

On Wednesday, another federal judge blocked the Trump administration's Medicaid work requirements for low-income people.

The plans at issue in Bates' ruling Thursday allow groups of small businesses and sole proprietors to band together to offer lower-cost coverage that doesn't have to include all the benefits required by the ACA, often called "Obamacare." The plans also can be offered across state lines, an attempt to deliver on a major Trump campaign promise.

But Bates wrote that key parts of the Trump administration's policy are "unlawful and must be set aside" because they go against established definitions of what constitutes an employer under a decades-old federal law that governs workplace health and pension benefits.

In particular, a decision by the administration that sole proprietors can be counted both as employers and employees "stretches the statute too far," Bates wrote.

Trump has eagerly talked up the plans , claiming they're doing record business and promising small business owners "you're going to save massive amounts of money and have much better health care." But the plans don't seem to have had a major impact. The Labor Department regulation authorizing them only took effect last summer.

"There's been a few of these that have been announced," said Gary Claxton, an expert on employer health insurance with the nonpartisan Kaiser Family Foundation. "It hasn't been in effect all that long."

Claxton estimated that only a few thousand people may be covered by association plans at the moment. Initial estimates said 3 million to 4 million people eventually would enroll, compared with more than 160 million Americans covered by current employer plans.

New York Attorney General Letitia James, who joined other Democratic state officials in suing the Trump administration, said the judge "saw past the Trump administration's transparent effort to sabotage our health care system and gut these critical consumer protections in the service of its own partisan agenda."

Many state officials see federal insurance regulation of small-business plans as infringing on their own traditional authority.

The Trump administration, unable to repeal "Obamacare" in Congress, has tried to use its rule-making powers to open up a pathway for alternatives. In the case of plans for small business and sole proprietors, the administration's regulation granted them similar flexibility as enjoyed by big companies. Most large employer plans are not subject to state regulations, and the Obama health law did not make major changes to them either.

But Bates wrote that treating sole proprietors similar to major employers "creates absurd results." For example, said the judge, consider a hypothetical association of 51 sole business owners with no employees. Under the administration's rule, they would in effect be counted as having 51 employees. Not only that, each of the 51 working owners would also be counted as an "employer" although they have "zero" people working for them, the judge wrote. And the association would also count as an employer, for a total of 52 employers.

Bates was nominated to the federal bench by then-President George W. Bush, a Republican. His ruling seems to signal limits to how far the Trump administration can advance with its strategy of relying on regulations to transform health care.

It wasn't immediately clear how the Trump administration would respond, but officials have said they will keep moving ahead with the president's agenda.

Trump has made a sharp turn back to health care this week, with the administration joining the side of Texas and other GOP-led states seeking to completely overturn "Obamacare" as unconstitutional. At the same time, Trump has been promising a new health care plan that would be much better than "Obamacare," tweeting that Republicans will become "the Party of Great HealthCare!"

But there's no indication that the White House, executive branch agencies like Health and Human Services or Republicans in Congress are working on a comprehensive plan. Many congressional Republicans see the Texas lawsuit as a political land mine. If "Obamacare" is overturned Republicans would be on the hook in the 2020 election year to come up with an alternative.

The GOP turmoil over health care has come as a boon to Democrats, who are looking to change the subject from special counsel Robert Mueller's conclusion that the Trump campaign did not conspire with the Russian government to sway the 2016 election. House Speaker Nancy Pelosi this week joined in unveiling legislation that would shore up and expand the ACA, allowing many more middle-class households to qualify for assistance paying their premiums.

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