A federal district judge yesterday vacated a Department of Labor final rule that modified the definition of “employer” under federal law such that more individuals, including sole proprietors, are eligible to participate in association health plans based on geography or industry. Twelve state attorneys general challenged the rule last year in the District of Columbia court, alleging it violates the Administrative Procedures Act, Affordable Care Act and Employee Retirement Income Security Act. U.S. District Judge John Bates said the rule “unreasonably expands the definition of ‘employers’ to include groups without any real commonality of interest and to bring working owners without employees within ERISA’s scope despite Congress’s clear intent that ERISA cover benefits arising out of employment relationships. Accordingly, these provisions are unlawful and must be set aside under the APA.” Because the final rule includes a provision allowing invalid provisions to be severed, the court sent the rule back to the agency to consider how the severability provision affects the remaining portions of the rule.

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