Executive Action on Health Care

The White House made two major announcements on October 12, 2017 regarding the Affordable Care Act (ACA).  The Executive Order and the ACA subsidies announcement are the latest action the current administration has taken in its efforts to dismantle the ACA.

The administration has announced, effective immediately, that it will no longer reimburse insurers for cost-sharing reductions made available to qualifying individuals through the Healthcare Marketplace. Because Congress did not pass an appropriation for this expense, the Trump administration has taken the position that it cannot lawfully make the cost-sharing reduction payments. The Executive Order is intended to change certain rules under the ACA.

While the immediate impact of these announcements is uncertain, we are talking a close look at the details and implications of each action.

More About ACA Subsidies

The ACA created two federal health insurance subsidies – premium tax credits and cost-sharing reductions. This was done to help eligible individuals and families purchase insurance through the Exchange. Individuals who received cost-sharing reductions had lower out-of-pocket costs (i.e. lower deductibles and copayments). The ACA required insurers offering Exchange plans to reduce cost sharing for eligible individuals and required the Federal government to reimburse insurers for the cost of that reduction monthly.

On May 12, 2016, a federal district court judge for the District of Columbia in House of Representatives v. Burwell (now House v. Price) ruled that the federal government did not have constitutional authority to reimburse insures for these cost-sharing reductions. The ruling was put on hold pending an appeal so as a result the reductions have continued to be paid until a higher court made the final determination. Currently, the appeal is still pending.

With the announcement, the federal government plans to end the cost-sharing payments effective immediately. However, premium tax credits will continue to be available. Several states have indicated they will sue the federal government to force the cost-sharing reduction payments to be made. Additionally, some members of Congress have stated they would support a measure enacting an appropriation for these payments. Until a Federal Court intervenes or Congress enacts an appropriation, the payments will no longer be made.

Details on the Executive Order

This order will relax regulations on association health plans. The executive order directs Federal agencies to expand access to Multiple Employer Welfare Arrangements (MEWA), HRAs & short-term limited-duration insurance.

Association Health Plans are an alternative option to traditional group health insurance. With these plans, several businesses pool funds together to pay for benefits, or buy group health insurance for their employees. These Association plans, MEWAs, 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.  MEWA’s have been subject to state insurance laws for many years and the Obama administration tightened regulations of these plans by subjecting them to additional ACA requirements. The Executive Order directs the pertinent Federal Departments to draft regulations expanding access to association health plans.   Employers can now form associations across state lines and avoid certain ACA requirements.

Additionally, the Executive Order ask the Departments to consider expanding the coverage periods of low-cost, short-term, limited-duration insurance.  These types of plan are typically restricted to less than 3 months, whereas in the past they could last up to 12 months and be renewed by the insurer.

These insurance plans generally benefit individuals who:

Are between jobs;

Have limited coverage networks; and

In counties with only a single insurer offering Exchange plans;

Missed the Exchange open enrollment period, but still want insurance.

 

Lastly, the Executive Order directs Federal Departments to expand the employer’s ability to offer HRA’s to their employees and allow HRA’s to be used in conjunction with individual health insurance coverage.

The Executive Order is very broad and does not make any changes to the existing regulations. Instead, it directs Federal agencies to issue new regulations or guidance to implement the executive order’s policies. Federal agencies have broad authority in drafting and implementing regulations in response to an executive order, but new regulations and policies will most likely have to go through a waiting period before being implemented. As a result, the ACA policies and regulations will continue to apply until new legislation is passed.

IMPORTANT DATES

November 1, 2017

Open Enrollment for 2018 coverage through the Exchange begins.

December 11, 2017

 

Agencies have 60 days to draft regulation to implement changes related to MEWA’s & short-term insurance

February 9, 2018

Agencies have 120 days to draft regulations to implement changes related to HRA’s.

 

 

We have compiled both the ACA Compliance Bulletin & Healthcare Bulletin for your convenience. We recommend downloading a copy reference.