This is a study about the non-group and small-group market segments of health insurance in the United States. Association health plans (AHPs) under the Affordable Care Act (ACA) allow small firms to gain access to affordable health care by pooling similar risk groups and taking advantage of significant cost savings typically available only to large employers and their large-group plans. Controversy arose after the U.S. Department of Labor (DOL) permitted the self-employed and made it easier for small firms to join AHPs that can be treated as large-group health plans, exempt from the protections and standards of non-group and small-group plans under the ACA. This study examines why and how regulatory policy might allow these beneficiaries to gain the advantages of large-group AHPs and avoid the responsibilities of non-group and small-group coverage. It adapts a transaction cost approach to analyze legislative intent, market risks, and regulatory alternatives and implications. Because transaction costs are considerably present, one set of jurisdictional rights could be deemed more efficient on the basis of the regulatory framework upheld by an impartial arbiter and the policy consequences — whether intended or not — that it anticipates in dispute resolution. In the presence of multiple and reciprocal transaction costs, the study suggests that litigating and adjudicating AHP regulatory policy may be optimal compared to other means that the contending parties could possibly arrive at themselves. The prospect of an adverse judgment may also incentivize at least one party to negotiate, if not withdraw from, contestation.