Judge blocks Trump's small-business health insurance plan

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 legal setbacks came as Trump unexpectedly pivoted back to health care this week, promising a new plan to replace the ACA, commonly called "Obamacare." But many congressional Republicans don't want to have that fight again. Democrats are gleeful, seeing a chance to shift the national conversation to one of their top issues.

Justice Department spokeswoman Kelly Laco said in a statement Friday the Trump administration disagrees with the judge's ruling on association health plans and is "considering all available options," including an appeal.

RELATED: Protests for and against Obamacare

13 PHOTOS
Protests for and against Obamacare
See Gallery
Protests for and against Obamacare

Tea Party Patriots supporters hold signs protesting the Affordable Care Act in front of the Supreme Court as the court hears arguments on the health care reform bill on Tuesday, March 27, 2012.

(Photo By Bill Clark/CQ Roll Call)

Affordable Care Act supporters wave signs outside the Supreme Court after the court upheld court's Obamacare on Thursday, June 25, 2015.

(Photo By Bill Clark/CQ Roll Call)

A man holds signs during a protest on the second day of oral arguments for the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court building on March 27, 2012 in Washington, DC. Today is the second of three days the high court has set aside to hear six hours of arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

(Photo by Mark Wilson/Getty Images)

Sister Caroline attends a rally with other supporters of religious freedom to praise the Supreme Court's decision in the Hobby Lobby, contraception coverage requirement case on June 30, 2014 in Chicago, Illinois. Oklahoma-based Hobby Lobby, which operates a chain of arts-and-craft stores, challenged the provision and the high court ruled 5-4 that requiring family-owned corporations to pay for insurance coverage for contraception under the Affordable Care Act violated a federal law protecting religious freedom.

(Photo by Scott Olson/Getty Images)

An Obamacare supporter counter protests a Tea Party rally in front of the U.S. Supreme Court in the morning hours of March 27, 2012 in Washington, DC. The Supreme Court continued to hear oral arguments on the Patient Protection and Affordable Care Act.

(Photo by Alex Wong/Getty Images)

Affordable Care Act supporters hold up signs outside the Supreme Court as they wait for the court's decision on Obamacare on Thursday, June 25, 2015.

(Photo By Bill Clark/CQ Roll Call)

Ron Kirby holds a sign while marching in protest of the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court on March 26, 2012 in Washington, DC. Today the high court, which has set aside six hours over three days, will hear arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

(Photo by Mark Wilson/Getty Images)

A protester waves his bible in the air as he overpowered by cheers from supporters of the Affordable Care Act as they celebrate the opinion for health care outside of the Supreme Court in Washington,Thursday June 25, 2015. The Supreme Court on Thursday upheld the nationwide tax subsidies under President Barack Obama's health care overhaul, in a ruling that preserves health insurance for millions of Americans.

(Photo By Al Drago/CQ Roll Call)

Nuns, who are opposed to the Affordable Care Act's contraception mandate, and other supporters rally outside of the Supreme Court in Washington, D.C., U.S., on Wednesday, March 23, 2016. On Wednesday morning, the Supreme Court is scheduled to hear oral arguments in Zubik v. Burwell, a consolidated case brought by religious groups challenging a process for opting out of the Affordable Care Act's contraception mandate.

(Drew Angerer/Bloomberg via Getty Images)

Supporters of contraception rally before Zubik v. Burwell, an appeal brought by Christian groups demanding full exemption from the requirement to provide insurance covering contraception under the Affordable Care Act, is heard by the U.S. Supreme Court in Washington March 23, 2016.

(REUTERS/Joshua Roberts)

Protestors hold placards challenging 'Obamacare' outside of the US Supreme Court on March 4, 2015 in Washington, DC. The US Supreme Court heard a second challenge to US President Barack Obama's Affordable Care Act. The US Supreme Court faces a momentous case Wednesday on the sweeping health insurance reform law that President Barack Obama wants to leave as part of his legacy. The question before the court is whether the seven million people or more who subscribed via the government's website can obtain tax subsidies that make the coverage affordable. A ruling is expected in June.

(MANDEL NGAN/AFP/Getty Images)

 Linda Door (L) protests against President Obama's health care plan in front of the U.S. Supreme Court Building on March 26, 2012 in Washington, DC. Today the high court, which has set aside six hours over three days, will hear arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

(Photo by Mark Wilson/Getty Images)

Supporters of the Affordable Care Act celebrate after the Supreme Court up held the law in the 6-3 vote at the Supreme Court in Washington June 25, 2015. The U.S. Supreme Court on Thursday upheld the nationwide availability of tax subsidies that are crucial to the implementation of President Barack Obama's signature healthcare law, handing a major victory to the president.

(REUTERS/Joshua Roberts)

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

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 "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 businesses 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 also would 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 could signal limits to how far the Trump administration can advance with its strategy of relying on regulations to transform health care.

Trump is undeterred. The president jumped back into the health care debate this week, with the administration joining the side of Texas and other GOP-led states seeking to completely overturn "Obamacare" as unconstitutional. He's also 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 "Obamacare," allowing many more middle-class households to qualify for assistance paying their premiums.

Read Full Story

Sign up for Breaking News by AOL to get the latest breaking news alerts and updates delivered straight to your inbox.

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.