As part of the executive branch’s ongoing efforts to peel back portions of
the Patient Protection and Affordable Care Act of 2010 and its companion
statute, the Health Care and Education Reconciliation Act of 2010 (referred
to collectively as the ACA), President Trump on Oct. 12 issued an Executive
Order aimed at “Promoting Healthcare Choice and Competition Across the
United States” (the Order). The Order states that the policy of the
executive branch is to facilitate the purchase of insurance across state
lines and develop a healthcare system that “provides high quality care at
affordable prices.”
To achieve these goals, the Order promoted three objectives:
- expanding alternatives such as association health plans and short-term,
limited duration plans, and increasing flexibility in the use of health
reimbursement arrangements(HRAs);
- lowering barriers to businesses entering the healthcare market and
limiting consolidation in the industry; and
- improving access to and quality of information regarding healthcare
(including data about prices and outcomes), while minimizing reporting
burdens on health plans, providers and payers.
The Order directs the Departments of Treasury, Labor, and Health and Human
Services to evaluate and consider revising existing regulations or
proposing new guidance within specific time frames. The major focus of the
Order was a discussion of three alternatives the administration believes
will help improve the healthcare marketplace, and, in so doing, assist in
meeting the Order’s stated objectives:
Association Health Plans
- The administration believes an expansion of association health plans
(plans based on common industry or geography) will help small businesses
pool risk to self-insure or purchase large group health insurance. The
Order directs the Secretary of Labor to consider proposing regulations or
revising guidance within 60 days of the date of the Order to expand access
to coverage by allowing more employers to form association health plans.
- Among other things, the Secretary of Labor is directed to consider
expanding the “commonality-of-interest” requirements under current
Department of Labor advisory opinions interpreting the definition of an
“employer” under Section 3(5) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA); however, the Order is unclear on how the
term “association” would ultimately be defined. While the Order suggests
that association health plans can be formed across state lines, it does not
describe how this process would be coordinated or how association plans
would work within the current framework of state insurance laws and
whether, and to what extent, ERISA preemption may apply. There is also no
mention in the Order on how association health plan expansion would
interact with Department of Labor rules regarding multiple employer welfare
arrangements (MEWAs) and any prior concerns of the Department of Labor
regarding fraud and abuse in multiple employer plan structures.
Short-Term, Limited-Duration (STLD) Insurance
- STLD insurance policies are currently exempt from broad-based market
reforms in Title I of the ACA, and therefore are not required to provide
the “minimum essential coverage” mandated for policies offered in the
individual marketplace. Final regulations issued by the Departments of
Treasury, Labor, and Health and Human Services in October 2016 (effective
December 30, 2016) restricted STLD coverage to three months, due to concern
about individuals purchasing STLD coverage as their primary coverage. Under
that regulation, STLD policies had to include a statement indicating that
the coverage was not qualifying health coverage that satisfies the health
coverage requirement of the ACA and indicating that those who had only STLD
coverage may be still exposed to the penalty under the individual mandate.
- While STLD coverage is typically “stripped down” coverage used by those
who are between jobs, due to its lower costs, the order seeks to expand
STLD into an “alternative” to the broader coverage options offered in the
individual market and on the government exchanges. The Order directs the
Departments' Secretaries to, within 60 days of the date of the Order,
consider proposing regulations or revising guidance to expand the
availability of STLD insurance, including permitting the STLD insurance to
cover longer periods and be renewed by the consumer. The Order does not
provide any further detail as to whether the coverage offered by
longer-term or renewable STLD policies will need to include a certain
number, type or minimum level of covered healthcare services, or the extent
to which such coverage will be deemed to qualify as coverage for either the
individual or employer mandate.
Health Reimbursement Arrangements (HRAs)
- Perhaps most importantly for employers, the Order suggests expanding the
flexibility and use of HRAs, which could mean the reconsideration or
reversal of prior Internal Revenue Service guidance that restricted the use
of HRAs to purchase coverage in the marketplace. While the Order
specifically targets small employers and notes that HRA expansion could
provide “more options for financing their healthcare,” such an expansion
could also benefit large employers.
-
Under existing guidance, specifically IRS Notice 2013-54, HRAs offered by
an employer must be integrated with employer-provided coverage, and
employers cannot use stand-alone HRAs to purchase any individual coverage
on a tax-favored basis. The underpinning of the guidance results from the
IRS’ position that HRAs constitute employer-provided group health plans,
but they are group health plans that provide tax-favored contributions
toward medical coverage and not any actual medical benefits, thereby
failing to meet the market reform requirements of the ACA unless integrated
with other medical coverage that provides those broad-based benefits.
Consequently, employers could not satisfy the employer mandate and avoid
assessments under Section 4980H of the Internal Revenue Code simply by
providing HRAs so employees could purchase individual coverage.
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The Order directs the Department's Secretaries to, within 120 days of
the date of the Order, consider proposing regulations or revising guidance
to increase the usability of HRAs, to expand employers’ ability to offer
HRAs to their employees, and to allow HRAs to be used in conjunction with
non-group coverage. A change in existing guidance as a result of the Order
as applied to HRAs, could have an impact on how different sizes of
employers fund and provide group health coverage.
Finally, the Order creates an obligation to report back to the President
regarding efforts to meet the Order’s objectives. The Secretary of Health
and Human Services, in consultation with the Secretaries of the Treasury
and Labor, and the Federal Trade Commission are to issue a report, within
180 days of the date of the Order and every two years thereafter, that: (a)
details the extent to which existing State and Federal laws, regulations,
guidance, requirements and policies fail to conform to the policies set
forth in the Order and (b) identifies actions that States or the Federal
government could take in furtherance of the policies set forth in the
Order.
As new information becomes available and should additional guidance be
issued as a result of the Order, expect updates to this article and
additional insights on health insurance reform initiatives.
For further information, please contact one of the authors of this article — Felicia M. Gardner, Sally Doubet King, and Carolyn M. Trenda — or any other member of the McGuireWoods employee benefits team.