President Trump’s highly publicized campaign promise to repeal and replace the Affordable Care Act (ACA) has been met with numerous Congressional roadblocks, the cumulative effect of which has taken repeal and replace off the table in the 2017 legislative session. For that reason, the Administration has looked to regulatory and executive authority to get the reform ball rolling. And while recent actions have garnered fiery reactions, it’s important to keep them in perspective in terms of scope and immediate impact. Here’s a summary of the key proposed changes.
Expanded Exemption to Contraception Mandate
As part of the ACA’s preventive care mandate, group health plans are required to provide full coverage for various forms of contraception for women, without applying any plan cost-sharing provisions. At the time of its enactment, this mandate was controversial for employers with religious or moral objections to paying for contraception. Based on that controversy, the regulators created a narrow exemption that would allow closely-held for-profit corporations, religious non-profit organizations, and religious employers (such as churches) to exclude coverage for contraceptive services and transfer the obligation to insurers and TPAs.
Interim Final Rules issued by the Departments of Treasury, Labor, and HHS (the “Departments”) on October 6, 2017 expand this exemption to any employer who objects to this coverage based on “sincerely held moral convictions” or “sincerely held religious beliefs” if such convictions or beliefs have been adopted and documented in accordance with applicable state law. This does not mean the cost of contraception will necessarily shift to participating employees. Exempt employers may accommodate covering these services by shifting the cost to the plan’s TPA or insurer; however, under prior rules this shift was required. Under the new interim final rules, it is optional.
While many in the news have reported this move as an elimination of the ACA’s contraception mandate, it is not. The majority of health plans will continue to provide contraceptive services with no cost share to participants. And although the availability of an exemption is expanded to all employers, in order to take advantage of it, employers will still be required to demonstrate a sincerely held moral or religious belief. Finally, the battle isn’t over. The ACLU and attorneys general for some states have already announced the intent to mount a legal challenge.
President Trump’s October 12, 2017 Executive Order
This Executive Order directed various federal departments to consider changes to certain rules under the ACA impacting small businesses, short-term health insurance policies, and employer-sponsored health reimbursement accounts (HRAs). While potentially impactful down the road, the Order makes no immediate changes to current law. Instead, it directs the Departments to consider making these changes in future regulatory guidance to ease the ACA’s burden on employers and individuals. Proposed changes include:
- Expanded access to association health plans. The Executive Order encourages the Department of Labor to adopt a broader interpretation of ERISA that would allow expansion of Association Health Plans (AHPs) for smaller employers in the same line of business. Allowing expansion of AHPs would allow employers to collectively purchase health insurance plans that would follow the ACA’s less restrictive large group mandates and avoid small market rules, such as community rating.
- Expanded short-term health plans. Under current ACA rules, short-term individual health insurance policies are available for up to three months and are non-renewable. Such policies are not required to follow many of the ACA mandates, including the requirement to cover the Essential Health Benefits package. The purpose of these short-term policies is to bridge a gap after a mid-year loss of coverage to avoid assessment of the individual mandate. The Order seeks expansion of these policies to allow them to be issued for a 12-month period and to allow renewal.
- Return of “Standalone” Health Reimbursement Accounts. Prior to the ACA, employers sometimes used HRAs as an alternative to offering a group health plan to employees. Standalone HRAs were permitted as the only plan offered to employees, and depending on design, could be used by participants to cover out-of-pocket medical expenses and even to reimburse the purchase of individual health policies. The ACA eliminated use of standalone HRAs except in very limited circumstances, such as for retirees. The Order asks the Departments to expand HRAs to once again allow reimbursement of health insurance premiums. In addition, the requirement that an HRA be linked to a group health plan in order to reimburse out-of-pocket medical expenses would be eliminated, substantially increasing the flexibility of these accounts.
- Discontinuation of Cost-Sharing Reduction payments. Finally, in a separate announcement on October 12, the Administration announced the discontinuation of Cost Sharing Reduction (“CSR”) payments to insurers participating in the state or federal Health Insurance Marketplace. These CSR payments serve to repay insurers who are required under the ACA to subsidize deductibles, coinsurance, and co-pays for policies sold in the Marketplace for qualifying low-income individuals. The Administration’s rationale for discontinuation is that Congress has not appropriated funds to cover these payments. Importantly, the ACA requires insurers to honor any reduced cost-sharing in Marketplace policies, so individual policyholders will not be impacted in the short-term. However, the withholding of this funding could cause more insurers to exit the Marketplace, where options continue to decrease every year. This one will be interesting to watch, as insurance companies react and put pressure on lawmakers to authorize the required funding.
Much of what has been recently announced does not have immediate impact on employer-sponsored health plans. The ACA remains the law of the land, and compliance with its key provisions remains necessary. That said, the desire for change in Washington is not going away. FirstPerson’s Compliance and Advisory Teams will continue to monitor this evolving federal regulatory landscape and provide updates as impactful developments unfold.