United States: Issue 113: Are Reports of ObamaCare's Death Greatly Exaggerated?

This is the one hundred and thirteenth issue in our series of alerts for employers on selected topics on health care reform. ( Click here to access our general Summary of Health Care Reform and other issues in this series.) This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

The Republicans made a last ditch effort to repeal the Affordable Care Act (ACA) the last week of September when they floated the latest iteration of proposed legislation under the Graham-Cassidy bill. Sens. Lindsey Graham (SC) and Bill Cassidy (LA) introduced a bill that would have altered federal funding by eliminating the ACA's subsidized insurance coverage and Medicaid expansion, and instead give states fewer funds in the form of block grants. However, the September 30th deadline to pass legislation with a simple majority came and went without the bill being called for a vote after too many Republican senators came out against it.

That left many wondering if the health care reform efforts were dead with the attention of Congress turning to the long-promised tax reform. However, the Trump administration has been fairly active in doing what it can to cut back on the ACA, with rule changes and executive orders that change the ACA landscape.

Contraceptive Mandate

The ACA mandates that health plans cover contraceptive care at 100% as a preventive service. Religious employers, non-profits with religious affiliations and certain closely-held corporations with sincerely held religious beliefs can opt-out of the coverage mandate. Click here to see our Alert on this topic. However, up until now, most for profit employers had to comply.

On October 6th, the Departments of Health and Human Services, Treasury, and Labor issued interim final rules that significantly broaden the scope of employers who can claim an exemption to the contraceptive mandate. Interestingly, the agencies skipped over the step of providing "proposed" rules, which would be subject to public comment, and went right to issuing interim final rules. (The government equivalent to the breach of etiquette created by skipping the triple dare and going right to the triple-dog dare.)

The interim final rules now expand the types of employers who can claim an exemption from the contraceptive mandate to include other non-profits as well as for profit companies, including publicly-traded companies and institutions of higher learning who have either sincerely-held religious beliefs or a moral conviction (not based in any particular religious belief).

The agencies noted that other preventive services are not impacted by the new rules, and emphasized their belief that only 200 entities (who filed lawsuits challenging the contraceptive mandate) will be impacted. Therefore, they conclude that 99.9% of women will not lose their contraceptive coverage as a result of the new rules.

Almost immediately several lawsuits were filed challenging the new rules and alleging violations of the First Amendment by favoring certain religious views, discrimination against women, and issuance without following proper government procedures.

Health Insurance Rules

On October 12, 2017, President Trump signed an Executive Order directing regulatory agencies to rewrite rules in several areas of health care previously regulated by the ACA. The nature and scope of these intended changes will not be clear until the agencies issue such guidance (which is expected within 60–120 days), but they appear to direct the agencies to create greater flexibility primarily in the individual and small group insurance market. Specifically the Executive Order addresses three areas:

Association Health Plans

Background: Many of the ACA's reforms only impacted insured policies in the individual and small group markets (typically, the small group market includes employers with under 50 employees). These regulations, including community rating standards (requiring healthier populations to pay more to subsidize sicker populations), and the essential health benefits mandate (requiring all policies to cover certain core benefits) drove up the cost of insurance in what was previously an under-regulated market in many states. It also created a disconnect between small group policies, on one hand, and large group policies and self-funded plans, on the other, that were exempt from these standards and had more flexibility in plan design.

Executive Order Response: The Executive Order directs the regulatory agencies to interpret ERISA more broadly to permit individuals and small employers to band together to form Association Health Plans (AHPs). While the executive order contained few details, we presume that regulatory guidance will address a few key elements:

  • Current federal guidelines impose restrictions and reporting obligations on risk-pooling for unrelated employers and individuals (Multiple Employer Welfare Arrangements, or "MEWAs"). Notably, ERISA does not exempt MEWAs from state insurance regulations and many states prohibit MEWAs or more heavily regulate their activity. Presumably, regulatory guidance will create an opportunity for employers or individuals in a bona fide association to pool their risk in an insured (and potentially self-funded) arrangement while maintaining preemption from state insurance regulation. 
  • It also appears the order would exempt these AHPs from insurance mandates that otherwise apply in the small group market, including the community rating and essential health benefit mandates.
  • Finally, the Executive Order suggests the agencies will permit employers to "join together across State lines to offer coverage." It's unclear whether this directive is intended to simply permit unrelated employers in multiple different states to form a self-insured collective risk pool or to actually influence state insurance regulations that typically attach on a state-by-state basis.

Short-Term Limited Duration Health Insurance

Background: ACA regulations had significantly limited the exemption allowing short-term, limited-duration health plans to avoid many ACA mandates (e.g., prohibition on dollar limits and preventive services mandate). The exemption was intended to provide greater flexibility for these types of policies, which generally served to bridge gaps between health insurance enrollments, such as when transitioning from one job to another. But regulators had become concerned that these policies were being marketed and used as long-term health insurance solutions (only without the otherwise applicable ACA protections). See Issue 100 in our alert series for more information on ACA rules relating to these benefits.

Executive Order Response: The Executive Order directs agencies to consider expanding coverage under these short-term insurance policies. It's unclear exactly how the agencies would interpret this directive, but one possibility is that the agencies could revert to pre-ACA guidelines (permitting enrollment in these policies for up to 12 months and renewal under certain circumstances).

Expanded Use of Health Reimbursement Accounts

Background: In 2013, the regulatory agencies issued guidance essentially prohibiting employers from reimbursing employees (on a pre-tax basis or otherwise) for individual insurance policies. As we described in Issue 73, the agencies viewed these stand-alone health reimbursement arrangements (HRAs) as health plans that contain prohibited annual dollar limits (i.e., the HRA balance). As we described in Issue 103, Congress later created a limited exemption permitting use of stand-alone HRAs, but only for small employers that met certain strict requirements.

Executive Order Response: The Executive Order directs the agencies to consider changes to HRAs so employers can make better use of them for their employees. Presumably, the Administration intends to direct agencies to broaden the already applicable small employer exemption to apply to larger employers and to ease existing limits on the amount that can be reimbursed through HRAs (currently, $4,950 for self-only coverage or $10,000 for family coverage). Depending on the scope of these new guidelines, this could potentially create an opportunity for employers to offer so-called "defined contribution health plans" in which the employer provides employees with a set amount of money to be used to buy an individual insurance policy (where the employer carries risk).

The breadth of this Executive Order leaves many unanswered questions including how far the agencies will attempt to go with these regulations and whether the Executive Order is within the scope of the Administration's executive authority. Further, this proposal has already created concern among insurance carriers and state insurance commissioners that it has the potential to dilute/sicken the insurance market risk pool and raise costs for the federal government (which subsidizes the state Marketplaces). Specifically, the AHP and short-term, limited duration guidelines could serve to lure healthier populations (with less upside risk) out of the insurance market. Further, the HRA guidelines could encourage employers with sick populations to shift those groups to the individual insurance market while limiting the employer's risk to a defined pot of money.

Cost-Sharing Subsidies

Taking further action to fulfill his promise to let ObamaCare fail, late on October 12th, President Trump finally acted on his long-standing threat to cease funding the cost-sharing subsidies on the public Marketplaces. While the ACA had directed these payments, it relied on Congress to appropriate the monies. When Democrats lost control of Congress during the Obama Administration, the Republican led Congress declined to allocate the funding, leaving the Obama Administration to do so through executive action. It was unclear whether the Obama Administration had the authority to do so, which was the stated basis for the Trump Administration cutting off these funds (i.e., it is the responsibility of Congress, not the President, to allocate these monies).

This action was taken in the face of both parties in Congress urging the administration to continue the payments to stabilize the markets in the near term. Insurance providers on the Marketplaces were already skittish about the continuation of the payments, which help cover the cost of those lower-income enrollees facing more costly health conditions. This was seen as a large reason for the rate hikes announced for 2018. The latest action could cause more insurers to pull out of the Marketplaces all together. Further, it's expected that some carriers will sue the Administration for the funding, which was promised (but not funded) by the ACA. More than half of the enrollees on the Marketplaces qualified for the cost-sharing payments this year, which are expected to cost about $7 billion. Further, earlier Congressional Budget Office scoring indicated it will actually cost the government significant amounts to cut the funding, because it will cause carriers to increase premiums significantly (which are subsidized by the government and for which funding has been allocated).

This latest Administration action could accelerate bipartisan discussions to allocate funding, although it comes during a busy time when Congress is attempting to move forward tax reform (with budget and debt ceilings fights looming in December).

We will continue to monitor these developments and Congressional action (if any) and keep you apprised of any further movement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.