Federal court ruling limits DOL power, has implications for stakeholder insurance plans

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

According to the Aug. 17th decision, Department of Labor advisory opinions can be challenged in a court of law – including an opinion initially passed on a company called Data Marketing Partnerhship, LLC, according to Reuters. DMP had initially sought guidance from the DOL on its stakeholder health insurance plan to confirm it was ERISA compliant.

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

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

The lower court’s decision to overrule the Department of Labor was upheld by the 5th Circuit Court last week, which says that DOL rulings can be overturned in a court of law. Still, on the issue of ERISA compliance, the 5th Circuit did send the case back to a lower court, saying they needed to more thoroughly consider evidence about whether DMP’s users were actually “working owners,” according to Bloomberg Law. That means the exact fate of the health insurance plans for the 50,000 users of DMP remains up in the air.

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

The central issue of the case is a question of legitimacy, per Reuters. Some have argued that the health insurance plans offered through 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 insurance regulators and providers, like Blue Cross Blue Shield, sided with the Department of Labor for the case.

But DMP itself has insisted that they are following all rules and regulations as needed.