The U.S. Labor Department has submitted a draft rule proposal for White House review that would modify the definition of “employer” under federal benefits law to enable membership associations to broaden health plan offerings to their members. The initiative represents a second attempt to expand eligibility for association health plans under the Trump administration, following an earlier 2018 proposal that was vacated by federal courts in 2019 and subsequently rescinded by the Biden administration in 2024.
Health insurance costs continue to rise across the sector, with large employers facing projected increases of 9.5% in the upcoming year, according to benefits consulting firm Aon. Small businesses are experiencing steeper increases of approximately 14%, while insurers offering coverage through the Affordable Care Act marketplace are seeking median premium increases of 15% for 2027. The expiration of enhanced ACA subsidies at the end of 2025 has resulted in premium increases averaging 58% for marketplace enrollees this year, with millions of consumers expected to drop coverage as a result.
The 2018 proposal extended the definition of “employer” under the Employee Retirement Income Security Act to include self-employed workers and allowed associations to qualify for plan sponsorship based on shared geography among members in unrelated industries. However, a federal judge ruled that these provisions exceeded the Labor Department’s authority under ERISA, and the court also rejected the expanded qualification criteria for associations. The latest proposal faces uncertainty regarding whether it will again attempt to extend AHP eligibility to the self-employed population, which numbered approximately 11.9 million independent contractors as of 2023.
Proponents of broader AHP access, including the National Association of Realtors, argue that self-employed individuals deserve equivalent coverage options to those available to employees. Current law generally restricts AHPs to associations whose members work in the same industry and have employees. Experts note that treating association health plans as large-group plans could potentially offer lower premiums than individual marketplace coverage, though the specific details of the forthcoming proposal remain undisclosed pending White House review.
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