The U.S. Labor Department has submitted a draft rule proposal to federal review that would broaden how membership organizations and associations can offer health insurance coverage to their members. The proposal would modify the definition of “employer” under the Employee Retirement Income Security Act to expand eligibility for association health plans, or AHPs. If finalized, the rule could provide more affordable coverage options for millions of self-employed workers, gig economy participants, and small businesses currently seeking insurance on the individual market.
This marks the second attempt by the Labor Department to expand AHP eligibility under the current Trump administration. A prior effort in 2018 included provisions allowing self-employed individuals and sole proprietors to enroll in association plans, as well as enabling associations to qualify for plan sponsorship based on geographic proximity regardless of industry affiliation. However, a federal judge struck down key provisions of that rule in response to a lawsuit from 11 states, and the Biden administration formally rescinded it in 2024. The upcoming proposal appears to address concerns raised by the court, though specific details remain unknown.
Health insurance costs have become increasingly burdensome for consumers and businesses. Large employers are projected to see cost increases of 9.5% next year, while small businesses face increases around 14%, often passed along to workers through higher premiums or plan design changes. In the Affordable Care Act marketplace, insurers are seeking median premium increases of 15% for 2027. These pressures intensified after enhanced ACA subsidies expired at the end of last year, causing average premium payments to rise 58% this year for some enrollees, with millions expected to drop coverage.
Over 11.9 million independent contractors exist in the workforce, many of whom currently obtain coverage through the ACA marketplace if not covered through other means. Trade associations including self-employed members, such as the National Association of Realtors with 1.4 million members, have expressed support for expanded AHP access. Experts suggest that association health plans, when treated as large-group plans, may offer lower premiums than individual marketplace coverage while following somewhat different regulatory rules, though the precise structure of the new proposal remains under White House review.
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