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  • BC Network
    Wednesday, June 13, 2018

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across state lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people.”  One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”).  In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”).  The Department of Labor issued its proposed rule on January 5, 2018.

    In Part 1 of this “Deep Dive” series, we examined the history of AHPs and the effects of the changes proposed by the Trump Administration by providing a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations, which include Affinity Arrangements, Group Insurance Arrangements and AHPs.  In Part 2 of this “Deep Dive” series, we compared plan features of the three types of arrangements under current law.  In Part 3 of this “Deep Dive” series, we examined the qualification requirements for AHPs under current law.  In this installment of the “Deep Dive” series, we will examine the qualification requirements for AHPs under the proposed rule, then explain why the new requirements, if enacted in their current form, would result in the polar opposite outcome from the intended result enunciated in the Executive Order.  Rather than facilitate the expansion of AHPs, the proposed rule would result in their decline and ultimate demise.

    Proposed Qualification Requirements for AHPs

    ERISA provides that an employee benefit plan may be maintained by an association of employers that effectively operates like a single employer.  Under the current statutory and regulatory scheme, to be a bona fide association of employers, the members of the association must:

    • have a commonality of interest unrelated to the provision of benefits;
    • exercise control over the benefit plan; and
    • consist of employers with at least one employee.

    In addition, the association itself must

    • be a pre-existing organization; and
    • exist for a purpose other than providing health coverage to its members.

    The proposed rule would retain some of the current AHP requirements and modify or eliminate other existing requirements, as follows:

    • The commonality of interest requirement would be significantly expanded to allow employers who are either in the same line of business or industry or in the same geographic area to join together for the purpose of providing health insurance to their employees. As a result, many more organizations would be permitted to sponsor association health plans than is the case under existing law.
    • The requirement that the AHP consist solely of employers with at least one employee would be eliminated. As a result, sole proprietors and other self-employed individuals would be allowed to participate in AHPs for their own benefit.
    • The requirement that the association be a pre-existing organization would be eliminated.
    • The requirement that the association exist for a purpose other than providing health coverage to its members would be eliminated.
    • The proposed rule would retain the requirement that the employer-members control the AHP and would also require that the AHP have a formal organizational structure with a governing body and bylaws (or similar indication of formality).

    The New Nondiscrimination Requirement – A Death Sentence for AHPs

    While the provisions of the proposed rule discussed above would relax the existing requirements associated with forming an AHP, a new requirement added by the proposed rule would result in a virtual death knell for most existing AHPs and significantly inhibit the formation of new AHPs.

    In a significant and unwarranted departure from current law, the proposed rule prohibits AHPs from varying premiums across groups of employers except in very narrow circumstances.  However, commercial insurance carriers would not be so limited except to the extent of state and federal community rating requirements applicable to small groups.  If the proposed rule were issued in its current form, AHPs would be forced to quote basically the same rates for all member employers, and commercial carriers would quote unhealthy large employer groups at higher rates than healthy groups, ultimately resulting in adverse selection in the AHP market.  Large employer groups with higher-than-average claims would have a financial incentive to join AHPs, and healthier-than-average-groups with lower costs would inevitably choose to purchase health insurance from commercial carriers.  This dynamic would result in AHPs enrolling, on average, more costly groups than commercial carriers in the non-AHP market.  As a result, AHPs would then be required to increase premiums across the board, diminishing the ability to attract even moderately healthy groups, resulting in further market segmentation and destabilizing the AHP marketplace.

    The DOL states in the preamble to the proposed rule that its purpose is to encourage the establishment and growth of AHPs and to expand access of employers and their employees to more affordable health coverage by relaxing the regulatory requirements applicable to AHPs.  It is anticipated that the final AHP rule will be issued soon.  Given the avowed purposed of the rule, we expect the DOL to significantly modify, if not eliminate, the nondiscrimination requirement so that this purpose may be achieved.

    Friday, April 27, 2018

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across state lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    In Part 1 of this “Deep Dive” series, we examined the history of AHPs and the effects of the changes proposed by the Trump Administration by providing a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations, which include Affinity Arrangements, Group Insurance Arrangements (“GIAs”), and AHPs. In Part 2 of this “Deep Dive” series, we compared plan features of the three types of arrangements under current law.  In this installment of the “Deep Dive” series, we will examine the qualification requirements for AHPs under current law.

    Current Qualification Requirements for AHPs

    ERISA provides that an employee benefit plan may be maintained by an association of employers that effectively operates like a single employer.  Guidance around this concept has been developed through 40 years of case law and Department of Labor advisory opinions and, not surprisingly, such guidance is somewhat confusing and at times inconsistent. Nonetheless, certain basic principles can be garnered from the existing guidance. To be a bona fide association of employers, the members of the association must:

    • have a commonality of interest unrelated to the provision of benefits;
    • exercise control over the benefit plan; and
    • consist of employers with at least one employee.

    In addition, the association itself must

    • be a pre-existing organization; and
    • exist for a purpose other than providing health coverage to its members.

    The commonality of interest determination is made based on the facts and circumstances of each situation and is based on whether the members of the association have a genuine organizational relationship unrelated to the provision of benefits. Examples of activities that support a genuine organizational relationship include collaboration of resources for educational opportunities, developing marketing strategies, and other shared advocacy programs related to the particular industry. The group of employers must direct the operation and activities of the plan either through the ability to nominate, elect and remove a majority of the trustees or the ability to otherwise amend or terminate the benefit plan. Sole proprietors or other self-employed individuals who are not considered to be employees are not currently eligible to participate in AHPs.

    Benefit programs maintained by employers with no common industry affiliation or effectively controlled by a self-perpetuating board with no voice provided to the participating employers are not considered to be a bona fide association of employers. Practically speaking, very few association plans are treated as a single ERISA-covered plan under the current sub-regulatory framework, but instead are treated as a collection of plans each sponsored by individual employers.

    Currently, AHPs are subject to certain nondiscrimination requirements generally applicable to health insurance plans. AHPs are not allowed to discriminate within groups of similarly situated individuals with respect to eligibility, benefits and premiums based upon health-status factors. These rules do not, however, prohibit AHPs from varying premiums on an employer-by –employer basis.

    Next “Deep Dive”: Qualification Requirements for AHPs under the Proposed Rule

    Wednesday, March 21, 2018

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across State Lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American People.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    In Part 1 of this “Deep Dive” series, we started examining the history of AHPs and the effects of the changes proposed by the Trump Administration by providing a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations. This week, we compare features of the three types of arrangements when such arrangements are offered on a fully-insured basis.

    Comparison of Fully-Insured Arrangements

    Plan FeatureGroup Insurance ArrangementAffinity PlanAssociation Health Plan (fully-insured)
    ACA plan design requirements (e.g., requirement to provide essential health benefits)Look to size of employer to determine the extent to which ACA plan design requirements applyLook to size of employer to determine the extent to which ACA plan design requirements applyACA requirements relating to large employer plans apply
    Community rating rules (ACA)Look to size of employer to determine the extent to which ACA community rating rules applyLook to size of employer to determine the extent to which ACA community rating rules applyACA community rating rules do not apply
    State law community rating rulesLook to size of employer to determine the extent to which state community rating rules applyLook to size of employer to determine the extent to which state community rating rules applyState law community rating rules do not apply to the amount charged by the carrier to the AHP
    Ability to negotiate large discounts from carriersYesNoYes
    Ability to provide large firm solutions to small firmsYesNoYes

    The first two rows of this chart refer to which ACA plan design and rating rules apply to different types of plans, i.e. large or small plan rules. The third row of the chart addresses the extent to which state law community rating rules apply. The last two rows refer to the group health association’s ability to provide participants with the types of health insurance advantages procured by very large employers, such as lower plan administration rates.

    Next “Deep Dive”: AHP qualification under current law.

    Wednesday, March 7, 2018

    First in a Series

    On October 12, 2017, President Trump signed a “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States” (the “Executive Order”) to “facilitate the purchase of insurance across State Lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American People.” One of the stated goals in the Executive Order is to expand access to and allow more employers to form Association Health Plans (“AHPs”). In furtherance of this goal, the Executive Order directed the Department of Labor to consider proposing new rules to expand the definition of “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Department of Labor issued its proposed rule on January 5, 2018.

    With the renewed focus on AHPs, we will be examining the history of AHPs and the effects of the changes proposed by the Trump Administration in this “Deep Dive” series. First in our series is a high-level, summary overview of the three types of arrangements that fall under the umbrella of health arrangements sponsored by associations: Affinity Arrangements, Group Insurance Arrangements (“GIAs”), and AHPs.

    Affinity Arrangements

    • A trade group or association (e.g., a local chamber of commerce) endorses a specific health plan.
    • The insurance carrier for the health plan pays a royalty to the trade group or association.
    • The insurance carrier issues standard fully-insured policies to members of the association who elect to purchase coverage through the health plan.
      • There may be a discount off the standard rate for the health plan offered to members purchasing coverage, to the extent permitted by state and federal community rating rules.
    • Each member that purchases the insurance policy has its own health plan that must independently comply with all associated legal requirements.
    • Each member that purchases the insurance policy files its own Form 5500, if applicable.
    • Because each member has its own health plan, the Affinity Arrangement is not subject to Multiple Employer Welfare Arrangement (“MEWA”) rules.

    Group Insurance Arrangements (“GIA”)

    • A trade group or association establishes an independent trust, and a health insurance carrier issues a single group insurance policy to the trust.
    • Association members purchase insurance through the trust and receive a certificate of coverage.
    • Each such association member is treated as having its own plan under ERISA.
    • The GIA files a single Form 5500 (which satisfies the Form 5500 filing obligations of all member firms).
    • The GIA is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.

    AHP

    • A trade group or association establishes an independent trust, and the health insurance carrier issues a single group insurance policy to the trust.
    • Association members purchase insurance through the trust and receive a certificate of coverage.
    • Unlike a GIA, the AHP is considered to be a single plan covering multiple employers.
    • The AHP files a single Form 5500 for the plan.
    • The AHP is a MEWA subject to the MEWA rules and files a Form M-1 with the Department of Labor.

     

    Next “Deep Dive”: Comparison of Affinity Arrangements, GIAs, and AHPs under Current Law

    Monday, November 27, 2017

    The Affordable Care Act (ACA) introduced a “pay or play” scheme, effective January 1, 2015, in which Applicable Large Employers (ALEs) must offer affordable qualifying healthcare to their full-time employees (and their dependent children) or pay a penalty. Despite President Trump’s first Executive Order (discussed here) directing a rollback of the Affordable Care Act (ACA) and instructing the Secretary of Health and Human Services to minimize the “unwarranted economic and regulatory burden of the act,” the Internal Revenue Service (IRS) quietly updated its Questions and Answers on Employer Shared Responsibility Provisions Under the ACA to include the first official guidance detailing the process for enforcement of the penalty. Notably, this update coincided with an IRS announcement that penalties for the 2015 calendar year will be assessed late this year.

    The ALE penalty process starts with Letter 226J, which the IRS will send to ALEs it believes owe a penalty based on information reported on Forms 1095-C and 1094-C. The letter will explain the penalty calculations and describe steps to follow depending on whether the ALE agrees or disagrees with the proposed penalty amount.

    If you receive Letter 226J and disagree with the proposed penalty, you may:

    • Complete, sign and date Form 14764 ESRP Response (to be included with Letter 226J);
    • Include a statement explaining the basis for your disagreement (you may include supporting documentation) and describing any changes you want to make to the information reported on your Form(s) 1094-C or 1095-C (do not file a corrected Form 1094-C); and
    • Make any changes to Form 14765, Employee PTC Listing to dispute and make corrections to the assessable full-time employees (including any additional documentation supporting your changes).

    Generally, you will have 30 days from the date the letter was issued to respond. If the IRS does not receive your response by the response date indicated on the first page of Letter 226J, it will issue a Notice and Demand for the proposed and assessed penalty.

    The IRS will review any response to Letter 226J and respond with the appropriate version of Letter 227, which will outline any further actions you may need to take. If you disagree with the proposed or revised penalty in Letter 227, you may request a “pre-assessment conference” within the IRS Office of Appeals. However, you must do so by the response date indicated on Letter 227, which generally will be 30 days from the date of the letter. If, at the end of this process, the IRS determines a penalty is owed, it will issue a notice and demand for payment using Notice CP 220J.

    Given that it is already late November, ALEs should expect to begin receiving Letter 226Js in the near future.

    Tuesday, October 31, 2017

    New rules issued by the Trump administration, including both interim final and temporary regulations effective October 6, 2017, significantly expand “who” may object to the Patient Protection and Affordable Coverage Act’s (PPACA) contraceptive coverage mandate and why those entities or individuals may object.

    Background:

    Under the PPACA, the Health Resources and Services Administration (HRSA), a division of the United States Department of Health and Human Services (HHS), has the authority to require that certain preventive care and screenings for women be covered by specific group health plans and health insurance issuers.  HRSA has used that discretion to require, among other things, contraceptive coverage.  HHS, the Department of Labor, and the Department of the Treasury, the agencies tasked with enforcing that requirement, have permitted certain health insurance issuers and group health plans with religious objections, such as non-profit organization and church plans, to receive an exemption or accommodation from this requirement.  As a result of the Hobby Lobby litigation, closely held for-profit organizations with religious objections to contraceptive coverage were added to the list of entities which could request an accommodation; however, accommodations are intended to shift the cost of providing these services and supplies to third-party administrators and health insurance issuers rather than permitting a group health plan to truly not offer the services or supplies.

    The new world order:

    The first interim final rule and associated temporary regulations provide that all non-governmental plan sponsors and health insurance issuers that object to contraceptive coverage based on sincerely held religious beliefs, including student health plans of institutions of higher education, may qualify for an exemption.  Those same entities may request an accommodation rather than exemption if they prefer.  Individual employees, even those employed by governmental entities, are also permitted to object to contraceptive coverage’s inclusion in their health plan based on their sincerely held religious beliefs.

    The second interim final rule provides that the entities and individuals who may request an exemption may also request an exemption because of their sincerely held moral convictions, not just their religious beliefs.

    Conclusion:

    If you, or the group health plan you sponsor, object to contraceptive coverage based on a sincerely held religious belief or moral conviction, it is more likely than not that this expansion now permits you to exclude all or a portion of contraceptive coverage from your plan.

    Tuesday, August 8, 2017

    According to one recent survey, telemedicine services (i.e., remote delivery of healthcare services using telecommunications technology) among large employers (500 or more employees) grew from 18% in 2014 to 59% in 2016.  Common selling points touted by telemedicine vendors include reduced health care costs and employee convenience.  However, state licensure laws imposing restrictions on telemedicine practitioners can often limit the value (or even availability) of telemedicine services to employees.

    But that seems to be changing.

    Texas Law Change

    This summer Texas passed legislation (SB 1107) prohibiting regulatory agencies with authority over a health professional from adopting rules pertaining to telemedicine that would impose a higher standard of care than the in-person standard of care.  With the enactment of SB1107, the Texas Medical Board must revise portions of its existing telemedicine regulations, which had largely been viewed as some of the most restrictive in the country.  Key revisions proposed by the Board at its July meeting included the elimination of the following requirements:

    • Patient must be physically in the presence of an agent of the treating telemedicine practitioner
    • Physical examination of the patient by the telemedicine practitioner in a traditional office setting within the past twelve months
    • Interaction between the patient and telemedicine practitioner must be via live video feed

    However, it appears that the Board will continue its prohibition against the use of telemedicine for prescribing controlled substances for the treatment of chronic pain.

    Prescribing Controlled Substances

    Meanwhile other states have relaxed their rules relating to telemedicine practitioners seeking to prescribe controlled substances.  For example, the Florida Board of Medicine replaced its ban on any prescription of controlled substances using telemedicine with a new rule that allows telemedicine practitioners to issue prescriptions except in the case of controlled substances for the treatment of psychiatric disorders.  Delaware, Indiana, Michigan, Ohio and West Virginia have also expanded the circumstances under which telemedicine practitioners can prescribe controlled substances.

    For more information on the Texas legislation, read this overview from Bryan Cave’s healthcare attorneys.

    Expanded State Licensing of Practitioners

    State licensing laws generally preclude or restrict a provider licensed in one state from delivering medical services to individuals in another state.  Consequently, an out-of-state physician (absent certain exceptions) must obtain a full and unrestricted license to practice medicine on patients in a particular state.  In an effort to facilitate license portability and the practice of interstate telemedicine, the Federation of State Medical Boards developed an Interstate Medical Licensure Compact.  So far, 25 states participate in the Compact or have taken action to become Compact states.  Under the Compact, licensed physicians can qualify to practice medicine across state lines within the Compact if they meet the agreed upon eligibility requirements.

    Employer Compliance Considerations

    These and other actions by states to facilitate the growth of telemedicine may encourage more employers to jump on the telemedicine bandwagon.  However, employers should be aware that as with any group health plan, the provision of a telemedicine program to employees can raise a number of compliance issues under the Affordable Care Act (ACA), Health Insurance Portability and Accountability Act (HIPAA), Employee Retirement Income Security Act (ERISA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) as well as disqualify individuals participating in a high deductible health from making or receiving contributions to their health savings account.

    Friday, July 28, 2017

    Are you gearing up for open enrollment’s alphabet soup? Anyone who works in human resources/employee benefits and has survived even one open enrollment season knows just how busy that alphabet soup will make your next few months.

    Before open enrollment is in full swing and things get too crazy, you should spend some time reviewing the disclosures you will use. Even if you have a TPA who generally takes responsibility for open enrollment, the ultimate responsibility for legal compliance belongs to the plan administrator.

    In particular, this year there have been some major changes to the Summary of Benefits and Coverage (“SBC”). The new SBC requirements apply to all group health plans for plan years beginning on or after April 1, 2017. You should confirm that your SBC has been updated to satisfy the new requirements. Among other changes, you’ll notice that a new introductory paragraph has been added; certain questions have been eliminated, added (e.g., are there services covered before you meet your deductible?), or rephrased; and, a third coverage example has been added. Because the changes to the SBC are quite extensive this year, we recommend that you undertake a wholesale review of your SBC.

    Here are a few quick tips to help you review your SBC:

    1. Compare your SBC to the DOL’s template SBC: There’s a template available for your use at https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-template-final.pdf. We recommend using this template if you provide SBCs electronically because there are imbedded hyperlinks for each defined term that take participants directly to that exact term in healthcare.gov’s uniform glossary. If you don’t provide SBCs electronically, you will still need to reference the uniform glossary’s web address (https://www.healthcare.gov/sbc-glossary/) at the top of the SBC.
    2. Tips for Comparison on Form: When comparing your SBC to the template, here are some quick things to check:
    • Is the SBC no more than four doubled-sided pages;
    • Are all defined terms underlined; and
    • Are no rows or columns deleted?
    1. How to Compare for Substance: The Department of Labor has provided an instruction guide which includes detailed language and guidance for situations which may not be standard: https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-instructions-for-completing-the-individual-health-insurance-coverage-final.pdf. You should verify that the detailed SBC language requirements are satisfied (both what to say and what not to say).

    Our final word of advice: find time to review your SBCs now before your alphabet soup starts to boil (or call your friendly outside counsel for help)!

    Friday, May 5, 2017

    Health Care ReformAfter weeks of “will they or won’t they” that rivals some of the great TV sitcom near romances for suspense (even though it was considerably shorter), House Republicans passed the American Health Care Act (“AHCA”) just before going on recess (more information on the bill here and here).   As with the version that was released in early March, this is designed to meet the Republicans’ promise to “repeal and replace” the ACA.  As before, in many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is.

    Below is a brief summary of the most important points (many of which may look familiar from our prior post on the original iteration of the AHCA . Where we did not make any substantive changes from our prior post, we have indicated those with the words “No change”):

    • Employer Mandate, We Hardly Knew You (No change). The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
    • OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription (No change). This goes back to the old rules that allowed these reimbursements. This would begin in 2018.
    • Reduction in HSA Penalty (No change). One of the pay-fors for the ACA was an increase in the penalty for non-health expense distributions from HSAs from 10% to 20%. The AHCA takes it back to 10% starting in 2018.
    • Unlimited FSAs Are (or Would Be) Here Again (No change). AHCA repeals the $2,500 (as adjusted) limit on health FSA contributions starting in 2018.
    • Medicare Part D Subsidy Expenses Would Be Deductible Again (No change). The ACA still allowed Medicare Part D subsidies to be excluded from a company’s income, but denied the deduction, for tax purposes, for any expenses that were subsidized.  This reinstates the prior law that allowed a “double tax benefit” of both the exclusion of the subsidy from income and the deduction for the costs funded by the subsidy starting in 2018.
    • A New COBRA Subsidy (No change). The AHCA does away with ACA’s income-based subsidies in favor of age-based subsidies from $2,000 to $4,000 per individual per year (with a max of $14,000 for a family) with a phaseout for incomes over $75,000 per year ($150,000 for married filing jointly). However, unlike the ACA subsidies (which could only be used for individual market insurance), the new subsidies would also be available for unsubsidized COBRA coverage.   This would not kick in until 2020.  The subsidies are adjusted based on the CPI+1, which means they are probably unlikely to keep pace with medical inflation.  Additionally, any excess subsidy (which seems unlikely) would be put into an HSA for the individual’s benefit.
    • Trading in The Cadillac Tax for a Newer Model Year (No change). Hearing the outcry of employers who did not want their health benefits taxed, the bill instead kicks the Cadillac Tax down the road. Instead of applying in 2020, it now applies in 2025.  There is no adjustment to the thresholds in this bill, so it will still pick up coverage that is not all that “Cadillac” (despite its name). Despite being highly unpopular, the Cadillac Tax has basically survived.
    • HSA Enhancements (1 change). The HSA contribution limits would be increased effective in 2018 so that they are the same as the out of pocket maximums that apply to HSAs (currently $6,550 for self-only coverage and $13,100 for family coverage). Additionally, expenses incurred up to 60 days before the account is established could be reimbursed from the account.  This version of the bill would also allow both spouses to make HSA catch-up contributions to the same HSA.
    • Continuous Coverage Requirement (Minor Changes). In lieu of the individual mandate, the law would require individuals to maintain continuous coverage (with no more than a 63-day break in the twelve months prior to enrollment). If they did not, then insurance companies could assess a 30% enrollment surcharge above their regular premium through the end of the year in which they enroll.  This is designed to encourage individuals to stay in the insurance market.  Employers will recognize the 63-day break rule from the old HIPAA creditable coverage rules.  This is basically the same concept, only applied across both employer plans and the individual market (the HIPAA rules did not apply to the individual market).  And unlike the HIPAA rules, the penalty here is a 30% premium increase, whereas under the HIPAA rules, pre-existing conditions could be excluded for a period of time if the individual did not maintain creditable coverage.  For employers, this will probably mean a return to having to issue creditable coverage certificates.
    • No More Small Business Health Care Tax Credit. This would be eliminated starting in 2020. The tax credit was limited to ACA SHOP coverage and could only be claimed for two consecutive years.
    • Elimination of Additional Medicare Tax. The ACA added an additional 0.9% tax on wages above certain thresholds ostensibly to fund Medicare (although, given the way Congress budgets, it could theoretically have been used for anything). AHCA takes this tax away beginning in 2018.
    • Not so Essential Health Benefits. The AHCA allows states to seek a waiver of the current essential health benefits requirement to establish their own set of essential health benefits. For small group plans, this would mean a change in what they have to cover, if the state in which the insurance is issued obtains a waiver.  For large group plans and particularly self-insured plans, it is unclear what impact this will have.  While those plans are not required to cover essential health benefits, they cannot impose annual or lifetime limits on those benefits.  As a practical matter, most plans simply don’t have these limits on nearly all benefits to avoid confusing participants and complicating administration.  However, if a state obtains a waiver, its list of EHBs may be so small that some employers could consider changing their plan designs.

    The AHCA would make many other changes that are beyond the scope of this post, but these are the ones that are most likely to impact on employers or their plans.  Notably, the employer reporting requirement is not removed by this bill, so that will continue to be a compliance obligation.

    The open question is whether this bill will make it through the Senate.  It passed the House 217-213, which was one more than the bare minimum needed to achieve a majority (with certain House seats currently empty).   In the Senate, the margin is even thinner with Republicans holding a 51-49 majority and Vice President Pence holding a tie-breaking vote in the event of a 50-50 split.  Some key Republican Senators are also reportedly saying they will start with a clean slate, which means more negotiation and potential for talks within the Senate or in conference between the Senate and the House to stall.  At the present time, no Democratic support is expected in the Senate.

    Regardless, if and until this bill becomes law, we repeat, yet again, our earlier admonition: continue keeping up with your compliance obligations – and keep your eye on twitter.

    Thursday, April 20, 2017

    Stop-LossOn April 5, the “Self-Insurance Protection Act” passed the House and moved to the Senate.  This bill, if enacted, would amend ERISA, the Public Health Service Act and the Internal Revenue Code (the “Big 3” statutes containing ACA rules) to exclude from the definition of “health insurance coverage” any stop-loss policies obtained by self-insured health plans or a sponsor of a self-insured health plan.  No additional guidance is given regarding what would constitute a “stop-loss policy” under the proposed definition.  According to this fact sheet from one Congressional committee, the law appears to address concerns that HHS might one day decide to try and regulate stop-loss insurance.  In our opinion, that seems unlikely under the current administration, but it could be a regulatory priority in future administrations.

    But what does the Self-Insurance Protection Act mean for state regulation of stop-loss insurance?

    As the Department of Labor noted in a prior technical release (and as we have written about previously), states have been attempting to regulate stop-loss insurance and have previously sought to include stop-loss insurance in the definition of “health insurance coverage” under certain circumstances (i.e., policies with attachment points below specified amounts).  However, such laws have been found to be preempted by ERISA.  In comparison, and as the DOL notes, state laws prohibiting insurers from issuing stop-loss policies with attachment points below specified thresholds are generally not preempted because they regulate insurance, which is an exception from ERISA preemption.  The upshot of this is that a state generally cannot force a stop-loss policy with a low attachment point to act like a regular medical policy, but a state could prevent the sale of that stop-loss policy.

    It appears that the Self-Insurance Protection Act, in its current form, merely gives an additional argument that stop-loss policies cannot be treated like major medical insurance, no matter how low the attachment point is.  This is like the proverbial “belt and suspenders” since treating stop-loss like major medical insurance has been found to be preempted in some cases.  The only additional protection is that the federal government would also be prevented from regulating stop-loss like regular health insurance.  However, in its current form, the act does not prevent states from requiring stop loss policies to have a minimum attachment point.

    In other words, this Act, if it becomes law, would not dramatically change the landscape for stop-loss policies. For most employers considering self-insurance, the key factor from a stop-loss perspective remains understanding what kinds of stop-loss policies your state will allow.