driven initiatives which can the department of labor's previous guidance use three criteria to determine whether a group is acting in its members interests there's an award challenge here is modified in some respects and to understand the difference it's easiest to look at a few concrete examples so under the guidance for example the american council for engineering companies established a plan that gives health care coverage to about ninety thousand dollars plus employees of more than one thousand seven hundred employers across all fifty states but under the old guidance it wasn't possible for a city's chamber of commerce to sponsor a similar class so the rules alternative criteria make that possible while also retaining the guidances requirement that the group be controlled in form an substance by its members now neither the states nor the district court can explain why groups that meet the rules criteria are acting any less in the interest of employers than groups that meet the guidance criteria both sets of criteria are designed to ensure that the group continues to act as the agent of its employer members what about the state argument that the code here are not adequate to prohibit commercial insurance compan expressly what the criteria are for are to figure out you know whether in a given the diversity of business organizations out there a particular group looks too much like a commercial insurance provider or not and the key to distinguish as the department of labor explained is whether the entity is acting as agents of the employers or is instead standing in some sort of rd party bargaining relationship like an insurance company and so the rule accomplishes this key objective by retaining the old guidances control requirement and that control requirement is incredibly robust as the rule explains for example on page twenty eight thousand nine hundred and twenty under this requirement of sufficient if an employer nominating a let the directors who run the group whether they can remove the people who run the group with or even without cause and whether they can approve or veto all decisions with respect to the health care per coverage plan that they are getting and so all of that which has to be present for any group that tries to become a group under the association health plans rule is sufficient to insure that a commercial insurance provider doesn't somehow c p and even notwithstanding the express probability on them doing so under be eight but that's not all the rule provides the rule also has a robust nondiscrimination requirement which stops the group from discriminating on the basis of what is what is a car to do with acting interests  presented with a particular group whether it is or isn't acting because you it's unlikely that a commercial insurance provider according to the department of labor would want to you know be in a relation in some sort of an event where they can't  discriminate right and so that's true also for the commonality requirement as still d in the rule that's true still for the business purpose requirement that's still in the rule but you know the fact that the department of labor elected under the rule to go further than what you risk might require doesn't mean that what the department of labor viewed it interpreted what it means for a group to act in the interest of its employer members was unreasonable particularly not under the chevron standard so can i ask you thought as i understand it the dispute here centers song three issues want one is the business purpose of the group and ninety one is the commonality of interest among the members and on its control and your rule is criticised for watering down the st two with those yes or is it is it your position that some form of those  two requirements is required by your research so it would be sufficient just to have control but right we don't need just to have control of the court doesn't need to go that far because as your owners pointed out the rule isn't so restricted i mean if we group of small employers want to create an entity for the sole purpose of providing a group plan and there are all sorts of perfectly good reasons for doing that efficiencies of scale you get a better deal and they created and they control it and it goes off and gets the welfare benefits for people i would think that entity is clearly acting indirectly in the interest of constituent employers and is a group or association of employers acting for the employer it's the language of the statute end of case so why are we even talking about the st two of these three hurricane i agree with you completely  so you know in our view what it means to act in the interest of employers that language is just to distinguish between people who are negotiating you know arm's length from you when people who are  the control requirement is essential to that because you know that but in the next year in asia in the explanation of the rule you seem to put some stock in the fact that these st two requirements were being preserved in substance yes your honor and so i think the best place to look at the rule to figure out what the department of labor meant by that is for example on page twenty eight thousand nine hundred and twenty two dollars where they just role are meant to do and the department said you know in our view it's nice to have the commonality of wire and that we've got and it's nice to have the substantial purpose requirement that we've got and the nondiscrimination because it  in figuring out whether an entity is more like an entrepreneurial insurance venture or employer grid venture but the fact that so those are designed those are those are designed as  i'm sorry this may be a simple question but suppose suppose an insurer that the hypothetical everyone is worried about is that the group the group employer is the insurance company and that might and they so if insure and that gets them within a researcher a good relationship supposed to state insurance regulation and everyone wars why even in the case of the insurer just on the narrow question of issue here which is the meaning of the definition employer what why wouldn't they be an employer know the key word i think in the definition is act in the interest of employers right so it's not enough for a company to say you know i give some feelings to employers that they like such as health care coverage so that means that you know they're deriving some benefit from their relationship with how the department of labor has always interpreted that rule is requiring some additional safeguards and former substance whether or not the nothing right and so that concern applies if the group employer is an insurance company or just like some random fraudster yes and you solve that problem with the control being us as somehow still requiring the stringent form of the commonality acquirement of the stringent form of the business purpose requirement that be the department had in its pri guidance i want to try a different subject on you here i take your i understand your argument about why the standard survives chevron two and even if i agreed with you about that we still have to confront the states or he would totally that that small employers will will stay s objective the department separate self that is to allow small businesses to join associations and become major businesses and therefore subject to the major two pieces of it and only two the st conflict as it were is the employee counting provisions of the cia and the nd conflict is the shared responsibility provisions of the acbl just just hokus on the definition says means an employer who employee an average of at least fifty employees and their argument is that can't possibly be an association i'm saying even if this even if you're totally wrong the either the final rule survives under chevron two hund know whether we're if so there's a two step process here right number one you have to convince the court that the aris a final rule is ok and then number two we're going to have to see how the h h s defines employee to see whether or not these newly created bona fide associations will in fact the able to qualify as major players correct we disagree or others so i thought that's what she said you know no three so disagree you know so that the only way they say look if you or disagree we disagree with the two part stand like you know the fact that the government used to prove to to prevail no no no not happens under the affordable care act is for another day correct yes ok now suppose but but i'm not sure it's quite that simple because the reason the department gave for changing the standards the criteria was to make it possible for small employers write to a small horse to be able to join together in associations and function that the word employee in the health care for his that is just plain old money being made it seems like it is it says employee employees and associations don't employ employees now if i think told hypotheticals assumes that just stick with my question my question is assuming you know the way chevron two words chevron to the way this court interpret them to is that the agency's interpretation of the statue has to be reasonable and has to give irrational explanation for right so even a rational even a reasonable interpretation of the regulation can fail if the agency is to able to give a rational explanation for  so that's just it say that yes your honor so if you look at the two thousand and eleven call that the idea is you know who is the relevant employer under the employee accounting provisions and the bulletin says the relevant employer is in this case the association health plan and that's not an oddity because as we pointed out in a reply brief and you can see the us it's the statute as forty two dollars u s c eighteen thousand and twenty four before recognizes that there are a number of different groups of employers that are nonetheless treated as a single employer under the statute and so that just underscores the fact that the term employer is used in the case yet which came from the p h s act doesn't have to me n and indeed has been interpreted by c m s not to mean what your question posits but the reason i've kind of been resisting going down this road is because at no point has in this case but also no one appears to have had a problem with c m s is interpretation of using it as applied to other association health plans so what about just two more questions number one how it's going to the other issue you raise you said are other reasons for the department to have made these changes other than the scylla taking the ability of small employers to get out from under the more onerous provisions of the small market but what are those so a couple of reasons in order include the fact that if you're a small employer it's difficult to get the benefit of you know bargaining power if you don't have that many employees this isn't the same this being able to participate in the major life i think it's slightly different because it doesn't really touch on you know whether you have to comply with the a c s essential benefits requirements or so on it's you know of you know being able to more precisely tailor your coverage to the needs of the members in your group and so you know on the very st page of the final rule the department walks through a lot of different policy reasons for why the government be satisfied i know this is an odd question to ask a litigant that unpaid but we do it sometimes with the government dissatisfied with an opinion that says yes this trial order this final rule survives under several two but the court is clearly right with regard to judge totals line of questioning about arbitrary and capricious review whether you think of that it's partnership stuff to work otherwise if their explanation depends on the proposition we can look at whether it makes sense and it doesn't either but but but in terms of what's before us what's before us is a district court order setting aside specific provisions of a regulation with the force an act of law and i don't see this issue addressed in any of those provisions so a couple of things  the because the deal takes pains throughout the final rule to repeatedly state that this is the only purpose for which the word employer is being reinterpreted and that is not by for example under the employer mandate and does not apply anywhere else that borrows and in the definition  association qualifies as an employer for purposes of research it does not become the employees are still counted only as employees of each individual individual lawyer so that means that were reasonable all that would mean is that they qualify as an employer it does not qualify them as a large employer there is there is a there is a intuitive incorrect intuitive leap in the final of small employers who are now able to join bona fide associations their ability to qualify in the major market because that the interpretation expressed in the preamble doesn't seem to bear on any question about what the rule means it's just a statement about done more than merely say ok here's how we think it's going to affect the aggregation principle they have also said oh it does not apply the purposes of the employer mandate were in fact for any purpose other ringback than the aggregation principle so by striving to so limit changing the definition to getting much older stache and and changing at the only one purpose which again is why it is it is before the court in this case i would say also but just on a risk your position right which is that the way the scheme works route rules governing who is an oiler don't necessarily govern who is an employee seems like that's further grounds for williamson the courtship by measure common sense as to whether congress intended this agency to have the authority to change the operation of a statute that is fundamentally delegated to a different agency and they are also affirmatively violating a provision in  of small employers to have the greatest protection and then employees of large employers would have at least the profession this becomes an employer mandate which requires the pain of the mandate if the large employer does not provide the percent of essential health benefits you know here's where it talks about things such as easy a regulatory complexity and burden that currently characterizes the market for individuals more people covered but then the entire rest of that paragraph has nothing whatsoever to do with the cia so it explains for example that association assume for the sake of argument that your opponents are right about the affordable care act can this work in a group plan work if you have all the different constituent employers and some are individual employers and some are small employers and some are large employers and that triggers three entirely different regulatory sheens under the ac and all of that with underlying employees subject in in the same group plan subject to the three different tiers of a ca regulation i don't want to get up too far in front of the agency because department of labor has done and you know as pay for you and then using the paragraph that you cited to me would support the proposition that there are independent benefits so even if my