WASHINGTON — A federal judge has struck down a small-business health insurance plan widely touted by President Trump, the second setback in a week for the administration’s health care initiatives.
US 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 that the Trump administration disagrees with the judge’s ruling on association health plans and is ‘‘considering all available options,’’ including an appeal.
The plans at issue in Bates’s 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. 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.
Letitia James, New York’s attorney general, 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 the ACA 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 as 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 the ACA as unconstitutional. He is also promising a new health care plan that would be much better than the ACA, 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 the ACA 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 in paying their premiums.