Federal Court ruling limits DOL’s power and has implications for stakeholder insurance plans

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Photo by Mike Scarcella/ALM.

A new ruling by the 5th Circuit Court of Appeals could change who is eligible for stakeholder health insurance plans.

According to the Aug. 17 ruling, Department of Labor advisory opinions can be challenged in court — including an opinion originally issued on a company called Data Marketing Partnerhship, LLC, according to Reuters. DMP originally sought advice from the DOL on its health insurance plan to confirm that it was ERISA compliant.

Like Reuters Previously reported, DMP is a data aggregation company that allows users to voluntarily download data tracking software onto their devices. They later receive a share of the profits from the data sold. According to DMP, this setup makes them “working owners” of the business, allowing them access to low-cost, less regulated health insurance.

When DMP sought to market its plans as ERISA-compliant, the Department of Labor stepped in, ruling in 2020 that DMP users did not meet the threshold necessary to be considered “active owners” and could not therefore not use the plans. However, a lower court decision later overturned those guidelines, saying that because DMP owners provided services to the company, they could be considered working owners.

The lower court’s decision to overturn the Department of Labor’s decision was upheld by the 5th Circuit Court last week, which says DOL decisions can be overturned in court. Yet on the issue of ERISA compliance, the 5th Circuit sent the case back to a lower court, saying it needed to further examine the evidence on whether DMP users were actually “working owners.” , according Bloomberg Law. This means that the exact fate of health insurance plans for DMP’s 50,000 users remains up in the air.

Related: EBSA and ERISA need some tweaks to better protect plan participants: DOL

The central question of the case is a question of legitimacy, for Reuters. Some have argued that the health insurance plans offered through the DMP amount to “junk insurance” and that the entire DMP system is a front to sell low-cost, unregulated health insurance to consumers. More than twenty states as well as some regulators and insurance providers, like Blue Cross Blue Shield, have sided with the Department of Labor on the case.

But DMP itself insisted that they followed all the necessary rules and regulations.

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