October 13, 2017
On Oct. 12, 2017, President Donald Trump signed an executive order intended to change certain rules under the Affordable Care Act (ACA). The order would relax regulations on association health plans, which could allow individuals and small businesses to purchase health insurance policies across state lines and avoid certain ACA requirements.
The executive order also directs the Departments of Labor, Health and Human Services, and the Treasury (Departments) to consider expanding the availability of short-term limited-duration insurance, and health reimbursement arrangements (HRAs). Through the executive order, along with the Oct. 12 White House announcement that it will stop making Cost-Sharing Reduction (CSR) payments and Interim Final Rules issued by the Departments last week on contraceptive coverage, the Administration continues to make ongoing efforts to modify or eliminate the ACA.
For clarification, an executive order is a broad policy directive that directs federal agencies to consider new regulations or guidance to implement the order's policies. The order does not make any changes to existing regulations and as a result, the executive order's specific impact will remain largely unclear until agencies can issue further guidance.
Association health plans are an existing alternative option to traditional group health insurance, where several businesses pool funds together to pay for benefits or buy group health insurance for their employees. Association health plans are intended to provide greater purchasing power and lower premiums for small employers by giving them an alternative to purchasing coverage in the small group market.
These arrangements are a type of multiple employer welfare arrangement (MEWA). MEWAs, including association health plans, have been subject to state insurance laws for many years. The Obama administration tightened regulation of these plans by subjecting them to additional ACA requirements, such as coverage of essential health benefits and premium rating restrictions.
The order directs the Departments to draft regulations expanding access to association health plans, potentially allowing employers to form groups across state lines and avoid certain ACA insurance requirements. This reform is intended to help accomplish an idea that has been long supported by President Trump, which is to allow health insurers to sell policies across state lines in an effort to increase free market competition. Specifically, the executive order directs the Departments to consider ways to promote association health plan formation on the basis of common geography or industry.
The executive order also directs the Departments to consider expanding coverage through low-cost short-term, limited-duration insurance, which is not subject to the ACA's market reform requirements.
Existing regulations under the ACA recently amended the definition of short-term, limited-duration insurance to restrict the duration to be less than three months, including any period for which the policy may be renewed. Previously, this type of insurance was allowed to last for up to 12 months and could be renewed.
Short-term, limited-duration insurance generally costs less than traditional types of health plans. According to the executive order, the main groups of individuals who benefit from this type of coverage are those that:
As a result, the executive order directs the Departments to revise the ACA's rules to allow short-term, limited-duration insurance to cover longer periods and be renewed by the consumer.
The executive order also directs the Departments to consider making specific changes to HRAs that would allow employers to make better use of them for their employees. HRAs are employer-funded accounts that reimburse employees for health care expenses, including deductibles and copayments.
The Administration specifically focused on three HRA rules it wants the agencies to consider modifying: making employer HRA contributions tax deductible, allowing HRA funds to be used for premium reimbursement, and allowing HRAs to be used in conjunction with individual health insurance coverage.
In the past week the Administration made two other announcements that do take effect immediately.
On Oct. 12, 2017, the White House announced it would discontinue CSR payments to insurers immediately. The ACA requires insurers to reduce cost-sharing for eligible, low-income individuals enrolled in silver plans through their local Marketplaces. This financial assistance is in addition to the Advance Premium Tax Credit. The Administration said because Congress has not appropriated funds for the CSRs, "the government cannot lawfully make the [CSR] payment." This decision primarily affects insurers who will no longer be reimbursed for the CSRs but are required by law to offer them to eligible customers. As a result, customers who have reduced cost-sharing through the Marketplace should not see an immediate impact.
Interim final rules (IFRs) issued Oct. 6, 2017 expanded the current exemption for employers to not cover contraceptive services under their sponsored group health plans. Effective immediately, employers may exclude coverage for contraceptive services based on moral or religious objections. This is in addition to the exemptions already outlined under the ACA for "closely-held" for-profit corporations, religious non-profit organizations and religious employers (e.g., churches). For more on these rules please refer to our previous ACA Pathways on the subject.
Ongoing compliance with the ACA is required unless and until official guidance to the contrary is issued. The CSR payment discontinuation and IFRs on contraceptive coverage are effective immediately. It is important to note, however, that the executive order does not immediately affect any current ACA rules and regulations, but directs the Departments to begin modifying or creating new rules. Burnham will keep you updated when the new rules are released.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
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