(Bloomberg) -- One of President Donald Trump’s health-care initiatives intended as a cheaper alternative to Obamacare suffered a crucial defeat when a judge ruled the policy violates the Affordable Care Act.
U.S. District Judge John Bates in Washington on Thursday blocked new rules governing so-called association health plans, or AHPs, which let businesses and individuals band together to create group health plans that offer less expensive coverage than the ACA -- but without some of its protections.
The decision is the second blow to Trump’s health agenda in as many days. It follows twin rulings Wednesday by another Washington judge who blocked administration-sanctioned plans to impose work requirements for some Medicaid recipients in Kentucky and Arkansas.
The Justice Department has hardened its opposition to Obamacare in separate litigation, and Trump is seeking to make health care a centerpiece of the Republican agenda going in to the 2020 campaign season.
"The final rule is clearly an end-run around the ACA," Bates, a 2001 appointee of Republican president George W. Bush, said in the ruling. "Indeed, as the president directed, and the secretary of labor confirmed, the final rule was designed to expand access to AHPs in order to avoid the most stringent requirements of the ACA."
The Justice Department on Friday said it’s "considering all available options" to respond to the ruling. “The administration will continue to fight for sole proprietors and small businesses so that they can have the freedom to band together to obtain more affordable, quality healthcare coverage," the agency said in a statement.
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The final rules governing AHPs were created by the Labor Department to comply with an executive order issued by Trump in October 2017. The agency has been phasing them in since August. The legal challenge was brought by nearly a dozen Democratic state attorneys general.
Some plans are already in the market, with offerings from UnitedHealth Group Inc. and Anthem Inc. either available now or on the way.
The attorneys general -- led by New York and including states ranging from Kentucky to California as well as the District of Columbia -- argued the new rules violate ACA provisions as well as the Employee Retirement Income Security Act, commonly known as Erisa.
Bates cited the “absurdity” of the Labor Department’s interpretation of a rule forming the basis of the initiative.
“We are pleased that the district court saw past the Trump Administration’s transparent effort to sabotage our healthcare system, and gut these critical consumer protections in the service of its own partisan agenda,” New York Attorney General Letitia James said in a statement.
While association health plans are bound by some ACA protections, they don’t have to adhere to a minimum set of benefits. The plans can also use demographic factors such as age, gender and occupation to set premiums.
They’re also not part of the same risk pools as Obamacare plans, raising concerns that they could siphon healthier people away from the ACA markets with lower premiums. Proponents of AHPs argued many of those people were already priced out, and the policy would offer them more affordable coverage.
The case is State of New York v. U.S. Department of Labor, 18-cv-1747, U.S. District Court, District of Columbia (Washington).
(Updates with comment from the Justice Department.)
--With assistance from Shannon Pettypiece and Kartikay Mehrotra.
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