The Trump Administration has taken a series of executive actions that affect the health care landscape. These actions include announcing that certain health insurance exchange payments will no longer be made to insurance companies and issuing an Executive Order to modify certain regulations.
Although these actions do not directly affect plan sponsors they are of interest to plan sponsors because the steps set the stage for future developments that could affect employment-based health benefits. This Update discusses these new developments and looks at implications for employer-sponsored group health plans.
The Administration issued an Executive Order on October 12, 2017 that directs several federal agencies to look at a series of regulations and propose modifications to those regulations.1 The Executive Order itself did not change any regulations.
The Executive Order directs the Department of Labor (DOL) to consider proposing regulations or revising guidance to expand access to health coverage by allowing more employers to form association health plans (AHPs). The Executive Order asks the DOL to modernize its interpretation of the Employee Retirement Income Security Act (ERISA) so that a much broader range of employers could sponsor AHPs. For example, the Executive Order encourages the DOL to adopt rules that could allow employers in the same line of business anywhere in the country — or any employers within certain geographic areas — to join to offer health care coverage to their employees.
The scope of the Executive Order could implicate several existing DOL regulations and advisory opinions, including regulations under ERISA Section 3(40) concerning Multiple Employer Welfare Arrangements (MEWAs) and the definition of “employer” under ERISA Section 3(5). The DOL has a longstanding history of enforcing ERISA’s rules against “sham” plans that attempt to take advantage of ERISA to avoid state insurance regulations. As it considers the Administration’s Executive Order, the DOL will likely be looking at issues such as the extent to which state insurance laws would apply to AHPs, whether an association must meet standards for a “bona fide association” and whether an AHP would be treated as a MEWA or as a single-employer plan.
The DOL is directed to propose guidance within 60 days of the order (i.e., December 11, 2017). Congress has considered legislation creating AHPs on many occasions, but has not enacted any laws that would govern an AHP. Therefore, there is no statutory roadmap for the Department’s analysis other than ERISA itself.
HRAs are a popular type of account-based group health plan that can be used to reimburse an individual for qualified medical expenses and certain types of health insurance. HRAs are funded by the employer, and cannot be funded via employee salary reductions. As a result of regulations and guidance issued under the Affordable Care Act, HRAs can no longer be offered on a stand-alone basis, other than for retiree-only groups, and must be integrated with another group health plan.
The Executive Order directs the DOL and the Departments of Treasury and Health and Human Services (the Departments) to consider proposing regulations or revising guidance to increase the usability of HRAs, to expand employers’ ability to offer HRAs, and to allow HRAs to be used in conjunction with nongroup coverage. Guidance must be issued within 120 days of the Executive Order (i.e., February 9, 2018).
The Departments are already reviewing a new type of HRA created by the 21st Century Cures Act, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA),2 and are expected to issue regulations concerning these accounts. QSEHRAs are employer-funded accounts that are subject to a maximum funding amount and that may be used to purchase health coverage in the individual market. Regulations expanding the use of HRAs may revisit the integration requirement and allow large employers and multiemployer plans to permit the purchase of individual health insurance policies. However, it is unlikely that policies purchased with HRA money would be eligible for federal premium assistance tax credits.
Short-term, limited-duration insurance (STLDI) is a type of health insurance coverage intended to fill temporary gaps in coverage, such as when an individual is transitioning from one plan to another. STLDI is not considered individual market insurance, so it is not subject to the Affordable Care Act’s health plan mandates, such as the prohibition on annual or lifetime dollar limits or the ban on preexisting condition exclusions. STLDI is also not “minimum essential coverage,” so an individual would not meet the mandate to purchase health insurance by having STLDI.
The Departments have previously defined STLDI as coverage that is less than three months, and cannot be extended longer. This was to prevent individuals from staying too long on coverage that did not contain the Affordable Care Act’s consumer protections.
The Administration directed the Departments of Treasury, Labor and HHS to consider proposing regulations or revising guidance to expand the availability of STLDI to cover longer time periods and be renewable. Guidance is to be proposed within 60 days (i.e, December 11, 2017).
On October 12, 2017, the Administration announced that it would halt payment of cost-sharing reduction (CSR) payments to insurance companies, and would not pay the payments due on October 18, 2017. The announcement sent shock waves through the health insurance community and resulted in some state insurance commissioners allowing insurers to raise premiums for many of the plans offered on the federal Marketplace and state health insurance Exchanges.
The payments in question are reimbursement to insurance companies for certain “silver” plans3 that have lower cost-sharing for individuals who have incomes between 100 and 250 percent of the Federal Poverty Level. These individuals enroll in specific silver plans that have lower cost sharing, and the insurers are reimbursed for the extra cost by the federal government. House Republicans challenged payment for the CSRs in court, arguing that the money had not been appropriated by Congress.4 Despite the litigation, the Administration had continued to pay the CSR payments on a month-to-month basis until this announcement. As soon as the Administration announced the payments would stop, several state attorneys general sued to continue the reimbursements.
The Congressional Budget Office (CBO) has estimated that eliminating CSR payments will cost the government $194 billion over 10 years. This is because elimination of CSRs is likely to lead to higher insurance premiums paid, at least in part, by the federal government. In fact, the CBO projected that halting the CSR payments would cause premiums for silver-level Exchange plans for the 2018 coverage year to rise by about 20 percent.
In addition to the Administration’s actions, Lamar Alexander (R-TN), chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Patty Murray (D-WA), the committee's ranking Democrat, spent a significant amount of time negotiating legislation that would stabilize the individual market. On October 17, 2017, the pair announced that they had reached agreement.
The bipartisan plan would fund CSR payments for the rest of 2017 and through 2019, and require insurance carriers to pass the savings on to consumers. It would reinstate the federal government’s consumer outreach program to encourage enrollment in the Marketplace/Exchanges, and would create a new “copper” plan that could provide catastrophic coverage to any enrollee (currently catastrophic plans are only available to those under 30 years old). The plan would also create more flexibility for HHS to approve state waivers of Affordable Care Act requirements, including reinsurance programs like the one recently approved for the State of Alaska.5
However, it is unclear whether the remaining Senators, House members or the President endorse the Alexander/Murray proposal. Congress is currently working on passing a budget, with a self-imposed deadline of December 8, 2017. Open enrollment in the Affordable Care Act Marketplace/Exchanges is currently scheduled to run from November 1, 2017 through December 15, 2017. Consequently, even if enacted, the legislation may not come soon enough to curtail premium increases for 2018 Marketplace/Exchange plans.
In 2017, approximately 177 million Americans receive their health coverage through employer-sponsored group health plans. Most of the actions taken by the Administration do not directly affect that coverage. However, plan sponsors have an interest in a stable individual and small group insurance market for a variety of reasons, such as assuring that part-time workers and pre-Medicare retirees have access to a viable insurance market. Actions that expand the availability of alternatives to Affordable Care Act-compliant insurance are likely to draw healthy people away from Marketplace/Exchange plans and could further destabilize the Marketplace/Exchanges.
Employers with HRAs will need to pay close attention to guidance that may change the rules for administering these accounts and what benefits can be paid from them.
Finally, to the extent that any health legislation is considered, plan sponsors are watching to see whether the Affordable Care Act’s excise tax on high-cost plans (popularly known as the “Cadillac tax”) will be delayed or repealed. The tax is currently scheduled to take effect January 1, 2020, unless Congress takes further action.
Sibson works with plan sponsors and their attorneys on health and compliance issues. We can provide ongoing updates on Congressional and regulatory actions. Plans that have not yet reviewed when they would be affected by the “Cadillac tax” should obtain a report on that information so that they can plan for the future in case the tax is not repealed or delayed.
For more information about how these new rules may affect your plan, please contact your Sibson consultant or the Sibson office nearest you.
1 The Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States is on the White House website.
2 For a summary of that law, see Sibson Consulting’s February 15, 2017 Update, “21st Century Cures Act Enhances Mental Health Parity Oversight and Creates New Small Employer Health Reimbursement Arrangement.”
3 The Affordable Care Act introduced the concept of actuarial value as a way to categorize health plans available to individuals through the Marketplace/Exchanges as “platinum,” “gold,” “silver” and “bronze.” Silver plans must provide benefits that are actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the plan.
4 U.S. House of Representatives v. Burwell, 185 F. Supp. 3d 165 (May 12, 2016).
5 Information about Alaska’s State Innovation Waiver is available on the Centers for Medicare & Medicaid Services website.
Update is Sibson Consulting’s electronic newsletter summarizing compliance news. Update is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.
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