The Labor Department is preparing a new regulation that could widen access to employer-style health plans sold through trade and membership groups, a move that would reshape options for the self-employed and small firms. The draft rule — now under White House review — revives a controversial idea that previously ran into legal trouble and could alter premiums and coverage across the individual market.
What the proposal would change
Federal records show the department has sent a draft rule to the Office of Information and Regulatory Affairs for review that would tweak how the law defines an “employer” under ERISA, the federal benefits statute. The practical effect: more associations could sponsor group plans known as association health plans (AHPs).
Details of the rule are not yet public. But if finalized, the definition changes could allow certain membership organizations — including those with sole proprietors or members from different industries — to offer health plans that are treated like large-group coverage.
Why this matters now
The timing is significant. Premiums in the Affordable Care Act marketplace jumped after enhanced subsidies expired in late 2025, and many consumers face steep increases this year. Lower-cost alternatives for people who don’t qualify for marketplace tax credits would be politically and financially consequential heading into upcoming elections.
Industry estimates back up the pressures: Aon projects large employers’ costs will rise roughly 9.5% next year, while KFF’s early analyses show typical small-business premiums could climb about 14% and insurers are seeking a median 15% increase for 2027 marketplace plans. KFF also found average premium payments rose about 58% this year for some enrollees after subsidy changes.
Who could benefit
Supporters say expanded AHPs could give independent workers and small businesses cheaper choices than buying individual marketplace plans.
- Self-employed workers: Roughly 11.9 million independent contractors might gain access to employer-style benefits if associations can enroll sole proprietors.
- Younger enrollees: Large-group pricing can allow plans to use broader age bands, so younger participants could see lower premiums than in the ACA market.
- Trade associations: Organizations such as real estate or professional groups argue members deserve group purchasing power similar to employees of larger firms.
As one policy expert put it, treating an AHP as a large-group plan can exempt it from some small-group and individual market rules, which may result in lower sticker prices for some enrollees.
| Stakeholder | Likely effect | Why it matters |
|---|---|---|
| Self-employed individuals | Possible lower premiums | Access to group rates not available to individual buyers |
| ACA marketplace enrollees | Risk of higher premiums | Healthier, younger people leaving the marketplace could raise average costs for remaining members |
| Small businesses | Mixed outcomes | Some may get new options; others could face market disruption depending on plan designs |
Legal history and open questions
This is the Labor Department’s second major attempt to broaden AHP eligibility. A 2018 rule under the prior administration expanded the ERISA definition of “employer” to include self-employed individuals and allowed associations to form plans based on geography rather than industry alone.
Those provisions were challenged by a coalition of states and a federal judge struck down key elements in 2019, saying the department had overextended the statutory definition. The Biden administration later rescinded portions of the rule in 2024.
Now the department appears to be revisiting the same legal terrain. “They’re reworking the employer definition,” said Kaye Pestaina of KFF, noting the department will likely try to address the court’s earlier concerns — but it’s unclear how.
Market consequences beyond premiums
An AHP treated as a large-group plan could also limit or modify benefits that the ACA requires in the small-group and individual markets. That flexibility may reduce costs, but it could also change the scope of covered services for enrollees.
Insurance experts caution about spillover effects: if healthier people migrate to lower-cost AHPs, the risk pool left on the marketplace could become older or sicker, pushing premiums up for those who remain and for subsidy-eligible consumers.
At the same time, trade groups such as the National Association of Realtors argue their members need comparable buying options. The association, which represents more than 1.4 million people, has argued that self-employed real estate professionals should have the same group coverage choices available to employees and unionized workers.
Practical implications for consumers
Today many solo operators purchase ACA marketplace plans that must include essential health benefits like prescription drug and mental health coverage. But those plans can be costly: KFF’s recent data show the average unsubsidized premium for a benchmark silver plan for a 40-year-old is about $625 per month.
The marketplace also contains an income cliff: households above 400% of the federal poverty level generally do not qualify for premium tax credits. For example, a single person with an income around $62,600 is at that threshold; earning slightly more can mean paying full price for coverage.
For people priced out of marketplace subsidies, AHPs could offer an alternative. But whether the trade-off in benefit design, provider networks and long-term market effects would be favorable depends on the final rule language and how insurers respond.
The Labor Department has not publicly commented on the draft rule while it undergoes White House review. Stakeholders — from consumer advocates to trade groups — will be watching closely as the proposal moves through the regulatory process.
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