In a move that could leave millions of consumers more exposed to bare-bones health insurance, the Department of Labor appears poised to settle a long-standing legal dispute over the fundamental question of what qualifies as job-based coverage in the United States. At issue is whether individuals can become “employees” of a company by simply downloading a data tracking app onto their phone or computer—and then buy into the company’s health insurance plan. By offering this type of employer plan, these so-called “partnership” arrangements do not have to comply with major consumer protections and can sidestep state insurance oversight and enforcement altogether.
The scope of any potential settlement in this lawsuit, known as Data Marketing Partnership v. Department of Labor, is unknown. But any move that encourages the proliferation of these so-called “partnership” arrangements could leave consumers without the coverage they need, contribute to higher premiums in the individual market, and undermine state authority to protect consumers.
Using A “Partnership” To Evade Consumer Protections
In 2018, LP Management Services—a Georgia-based data aggregation firm—asked the Department of Labor whether its “partnership” arrangement qualified as a single-employer self-insured group health plan under the Employee Retirement Income Security Act (ERISA). Individuals can have no other connection to one another but can become so-called “partners” after agreeing to download software and have their internet activity tracked. These “partners,” the company argues, qualify as employees who can enroll in health insurance through the arrangement—even if their internet usage data generates very little or no profit.
If this arrangement qualifies as a single-employer ERISA plan, LP Management Services can avoid major Affordable Care Act requirements that apply only in the individual and small group markets. For example, ERISA plans do not have to comply with consumer protections such as guaranteed issue, community rating, medical loss ratios, or coverage of the essential health benefits package. As a result, ERISA plans can cover less and impose higher rates (generally without limitation) based on age—enabling them to cherry pick younger, healthier consumers in ways that lead to higher premiums for individuals. This is presumably among the reasons why seven Republican attorneys general previously supported the arrangement as a strong “interim solution[]” until the Affordable Care Act could be replaced by Congress.
Consumer Complaints About “Partnership” Arrangements
Though not specific to the LP Management Services arrangement, consumers have filed hundreds of complaints over “partnership”-style products and their aggressive and fraudulent marketing. Zachary Mider and Zeke Faux, in a deeply reported Bloomberg article and podcast, described these complaints and “partnership” business practices. They estimate that more than 100,000 households had enrolled in this type of coverage as of late 2023, with “partnership” plans being sold under many different names (e.g., the American Partnership Group, Consumer Data Partners, Good Health, Outreach Data Partners, Quick Health, Seguro Medico, Socios Buenos, Vitamin Patch, etc.). They report that about 30,000 “employees” were associated with a single post office box in Atlanta, and data from two states suggested that “partnership” plans had loss ratios as low as 26 percent, meaning medical care accounted for only one-quarter of plan spending (with the rest used for administrative expenses and profit).
Mider and Faux told the story of Joe Strohmenger, a self-employed contractor in New York, and his wife, Sarah, who searched for health insurance online and were contacted by a telemarketer. Unbeknownst to them, the Strohmengers were enrolled in a “partnership” arrangement as well as “a fake job at a tech company in Georgia” that they were not aware of until months later. According to Joe, “he was never told about the job, never got paid and never did any work.” The Strohmengers ultimately paid about $20,000 for their coverage and were told it would cover their medical needs, including a specialist to monitor Joe’s benign brain tumor and a costly prescription drug. But many of their claims were denied and their refund requests were rejected. Without coverage, they started to avoid medical care.
Their story is just one of many complaints highlighted by Mider and Faux. Some consumers reported having no coverage at all or that the phone number on their insurance card led to a car dealership. Many, like the Strohmengers, were unaware of any purported employment relationship.
Trying To Evade State Regulation
“Partnership” plans may want to be designated as single-employer ERISA plans to avoid state regulation. Although the Department of Labor is responsible for regulating ERISA plans, the agency is chronically under-resourced and does not have the same authority as states do to, for instance, ensure plan solvency. This creates an enforcement and regulatory vacuum that leaves consumers who enroll (often unwittingly) in these plans with unexpected medical bills—and without recourse. As one former Department of Labor official warned, a proliferation of “partnership” arrangements could lead to “a wave of fraudulent payers organized as Ponzi schemes leaving unpaid claims the likes of which this country has never seen.”
To date, several state insurance departments have received complaints or taken enforcement action against these arrangements. For instance, insurance regulators in states such as Maryland, Oregon, and Washington have issued fines and cease-and-desist orders or have otherwise taken enforcement action against “partnership” entities. Insurance departments in still other states, such as Connecticut and Maine, have warned consumers not to enroll in “limited partner” or “part owner” health plans sold by telemarketers. Action in some states notwithstanding, Mider and Faux report that consumers in states such as Indiana, New York, and Texas were told that their state insurance departments were unable to assist them.
The Data Marketing Partnership Litigation: How We Got Here
LP Management Services—joined by Texas-based Data Marketing Partnership—sued the Department of Labor in 2019. As discussed in more detail here, these entities sought (1) assurance that their “partnership” arrangement constituted a single-employer ERISA plan; and (2) an injunction to block state and federal agencies from taking enforcement action against them.
In 2020, the Department of Labor issued its advisory opinion, concluding that this arrangement would not fall under ERISA at all. ERISA, the Department reasoned, regulates employee benefits. Here, there is no employer-employee relationship between LP Management Services and its limited partners since these individuals do not work for or through the partnership and do not receive income. Rather, LP Management Services appeared to be offering individual market coverage that must comply with the Affordable Care Act and state insurance requirements. LP Management Services and Data Marketing Partnership responded by amending their complaint to additionally challenge the advisory opinion.
As discussed in more detail here, Judge Reed O’Connor, a district court judge in Texas, agreed with the plaintiffs and set aside the advisory opinion as arbitrary and capricious and contrary to ERISA. He then went one step further by stepping into the shoes of the agency to conclude that the partnership’s arrangement qualifies as a single-employer ERISA plan. In doing so, he enjoined the Department from refusing to recognize the partnership and its members as a single-employer ERISA plan.
The first Trump administration appealed to the Fifth Circuit Court of Appeals, which upheld the district court’s decision as to the advisory opinion but not the injunction. The panel remanded the case back to Judge O’Connor to reinterpret certain parts of ERISA that were critical to his decision to issue an injunction. Amicus briefs were filed in support of the federal government by the National Association of Insurance Commissioners; a bipartisan group of state insurance commissioners; state attorneys general; the Blue Cross Blue Shield Association; patient advocates; and consumer advocates.
Since then, the litigation has been ongoing before Judge O’Connor. Most recently, the parties engaged in limited discovery with a renewed motion for summary judgment due on June 29, 2026. But, on June 18, the parties sought a 60-day stay to pursue settlement negotiations. Judge O’Connor granted this request, staying all deadlines through August 21 and directing the parties to submit a joint status report.
What A Potential Settlement Could Mean
The contours of a potential settlement in Data Marketing Partnership are unknown. But the owners of these entities previously insisted that they would not resolve this lawsuit “without some written acknowledgement of the single employer status of the DMP Plan.” (This statement was made in a separate lawsuit filed by the Department of Labor alleging that the leaders of these entities market, sell, and service bare-bones plans and pay exorbitant fees to vendors—which they own—while paying very few medical claims for plan enrollees in an effort “to collect and divert to themselves massive fees through self-dealing in violation of ERISA.” This litigation is ongoing.) Like Judge O’Connor’s since-vacated injunction, a settlement could be used to try to prevent future enforcement action by federal and state officials.
Any settlement that encourages the proliferation of “partnership” arrangements—including by copycat entities—would lead to at least three harms. First, consumers who enroll in these plans could, like the Strohmengers, face coverage gaps and be exposed to unpaid medical bills, leading to medical debt for patients and uncompensated care for providers. Second, because of these coverage gaps, “partnership” plans can offer lower premiums that attract younger and healthier consumers. This cherry picking, in turn, could lead to higher premiums for consumers that enroll in Affordable Care Act coverage. Third, “partnership” plans, if regulated entirely under ERISA, undermine state authority to protect consumers. The Department of Labor is unlikely to have the willingness or capacity to regulate these arrangements—and states would not be able to require licensure, ensure basic plan solvency, or enforce consumer protections.
These and other harms were outlined in amicus briefs filed by state officials, patient advocates, and others more than five years ago. These same risks persist today and are exacerbated by the fact that millions of consumers have already, or could soon, face higher premiums or lose their marketplace or Medicaid coverage after Congress failed to extend the enhanced premium tax credits and as the One Big Beautiful Bill Act takes effect. With millions more uninsured people, entities like Data Marketing Partnership (and their telemarketers) will have an even larger pool of people to target for enrollment in “partnership” plans.
Finally, a potential settlement in Data Marketing Partnership may be just the beginning of broader efforts by the Trump administration to expand access to coverage that does not meet Affordable Care Act requirements. Indeed, federal officials are currently reviewing a proposed rule that is expected to expand the availability of short-term limited duration insurance. And the Department of Labor intends to issue a new proposed rule to expand association health plans (presumably to try to revive a prior rule adopted during the first Trump administration that would have broadly expanded ERISA-regulated plans but was successfully challenged in court by Democratic attorneys general). Like the “partnership” arrangements noted above, these other forms of coverage have also been marked by fraud as well as aggressive and misleading marketing.