A years-long legal fight over whether people who simply download a data-tracking app can be legally recognized as employees may be nearing a settlement that critics say could unleash a wave of skimpy, unregulated health insurance across the country. The case, filed by Data Marketing Partnership against the U.S. Department of Labor, has wound through federal courts since 2019 and now touches on a question that reaches well beyond one Texas-based company: whether limited partners who agree to have their internet searches tracked can be treated as bona fide employees eligible for job-based health plans exempt from state insurance rules and Affordable Care Act coverage requirements.
As reported by the Miami Herald, a settlement in the case may be in the works, though its exact parameters remain unknown. Data Marketing Partnership has said that without official recognition as an employer, it would have to end coverage affecting about 50,000 policyholders, according to the same report. The company argues that offering insurance is a significant draw for recruiting partners and gaining access to their electronic data, per the Herald's reporting.
The dispute traces back to January 2020, when the Department of Labor's Employee Benefits Security Administration issued Advisory Opinion 2020-01A, concluding that limited partners who merely download tracking software to share browsing data do not form a valid employer-employee relationship under ERISA, according to the U.S. Department of Labor. LP Management Services had requested the opinion to confirm single-employer ERISA status for its limited partnership health programs, per the same agency filing.
A Texas Judge Sides With the Company
Later that year, U.S. District Judge Reed O'Connor in the Northern District of Texas ruled that the department's advisory opinion was arbitrary and capricious, concluding that individuals selling their web-browsing data were ERISA-eligible working owners of the partnership, according to BenefitsLink. The Herald reports that a Texas district court judge made this ruling in 2020, rejecting the Labor Department's position that internet data collection failed to establish a genuine employment relationship.
The case then went to the U.S. Court of Appeals for the Fifth Circuit, which in August 2022 found that the department's advisory opinion was a reviewable final agency action and set it aside — but vacated the lower court's injunction and sent the case back to Judge O'Connor to re-evaluate whether software downloaders truly qualify as working owners or bona fide partners, according to the Georgetown Center on Health Insurance Reforms. The Fifth Circuit's ruling left open the core statutory question of employee status, per Georgetown's analysis.
Why the Fight Over “Employer” Status Matters
The stakes hinge on a structural quirk of federal law. Self-insured, single-employer benefit plans enjoy broad ERISA preemption from state insurance rules, while health plans covering unrelated businesses or multiple employers are classified as Multiple Employer Welfare Arrangements, or MEWAs, and remain subject to state insurance licensing, solvency mandates, and benefit rules, according to the Wagner Law Group. If limited partners who download tracking apps are deemed employees of a single employer, that designation could let sponsors sidestep state oversight entirely.
Per the Herald's reporting, limited partners could buy into job-based health insurance plans that skip state insurance rules and ACA coverage requirements, with the company able to sell the tracked internet-search data those partners generate. The Employee Retirement Income Security Act, the 1974 federal law governing self-insured employer benefit plans, is the legal engine behind that potential exemption, the Herald notes. Self-insured employer plans do not have to cover the 10 broad categories of essential health benefits required under some ACA rules, according to the same report.
State Regulators Have Already Pushed Back
Several states have already taken action against similar limited-partnership arrangements. Washington's insurance commissioner ordered a company to stop offering limited-partnership plans and imposed a $25,000 fine in 2021, according to the Herald, after Washington regulators found the arrangement functioned as unauthorized commercial health insurance, per the U.S. House Committee on Education and the Workforce. Maryland fined The Vitamin Patch LLC in 2024 for offering similar limited-partnership insurance, according to the Maryland Insurance Administration.
Maine and Connecticut also warned consumers about limited-partnership coverage in 2024, per the Herald's reporting. The Maine Bureau of Insurance's advisory noted these plans are not major medical insurance and may leave consumers with large unpaid hospital bills. Connecticut's notice similarly warned that these plans do not provide comprehensive medical coverage and can leave consumers with large unpaid medical bills, according to the Herald. State insurance commissioners also filed legal arguments in the Fifth Circuit, according to the Health Care Litigation Tracker.
Warnings From Washington as Settlement Talks Continue
Not everyone in the case's orbit agrees on which way it should go. Seven right-leaning state attorneys general have urged the Department of Labor to designate limited partners as employees, the Herald reports, while nineteen patient advocacy groups sent a letter to the department on August 11 urging it to continue defending the case. The groups' letter urged the department to continue defending the case, per the same report.
U.S. Representative Bobby Scott sent a letter to the Department of Labor about the lawsuit, according to the House committee. Katie Keith, quoted by the Herald, said the settlement could lead to an even bigger expansion of alternative coverage and warned the case could open the way for promoting junk plans that do not meet ACA requirements.
Officials Weigh the Risk to Consumers
Ali Khawar told the Herald the plans could functionally become unregulated insurance companies, framing the dispute as fundamentally about state authority in insurance markets. Marie Grant said a wrong decision could harm consumers or weaken states, according to the same report. Aggressive marketing and telemarketing complaints have been reported, and limited-partnership coverage providers include The Vitamin Patch, Affiliated Workers Alliance, Consumer Data Partners, Employers Business Alliance, Socios Buenos, and Strategic Limited Partners.
The Trump administration has separately focused on expanding alternative coverage options such as short-term plans, which avoid ACA rules on preexisting conditions and benefit requirements, according to the Herald. That push comes as ACA marketplace premiums have surged, pushing millions to drop coverage in 2026 after the U.S. Senate declined in December 2025 to extend enhanced ACA premium tax credits created under the American Rescue Plan Act, according to Hoodline. ACA insurers have requested double-digit premium increases for 2027, the Herald reports, and proponents argue limited-partnership coverage could help people who earn too much to qualify for ACA subsidies. Whatever the Department of Labor ultimately decides, the outcome could determine whether millions of Americans gain a cheaper coverage option or simply a less protected one.
