On Oct. 12, 2017, President Trump issued an Executive Order related to the availability and expansion of association health plans (AHPs), short-term limited duration insurance (STLDI) policies and health reimbursement arrangements (HRAs).
On the same day, the White House also announced that it will no longer pay cost-sharing reduction subsidies to insurers.
In an effort to increase competition and provide access to alternative coverage in the health insurance market, the Order encourages the DOL to propose regulations that expand access to AHPs and allow coverage sales across state lines.
A similar provision was included in two previous Republican Senate proposals. Also, many states currently allow association plans. In those states, employers with a certain “commonality of interest” – who are not part of a controlled group – are permitted to come together to purchase health insurance in a move known as a “multiple employer welfare arrangement” under ERISA.
Such plans have increased reporting requirements to both the state Department of Insurance and the Employee Benefits Security Administration. However, most states prohibit or restrict self-insured association plans and discourage employer participation across state lines. This Order encourages the DOL to propose regulations permitting both practices as well as to review the definition of “commonality of interest” to grow the number of employers allowed to participate in an association plan.
This arrangement may be helpful to some employers who are currently in the small group market with age-banded rates and mandated essential health benefits. If they joined an AHP with other employers, they would escape community rating and move to large group experience premium rating, which can lead to lower premiums for an older, yet healthy employee population.
Another portion of the Order encourages the Treasury Department, DOL and HHS (the Departments) to propose regulations that allow individuals to continue STLDI coverage for a longer period of time. Access to an individual policy offered through an exchange is restricted in terms of when an individual may enroll. Enrollment through the exchange occurs during the annual open enrollment period. If an individual misses the opportunity, he or she may only enroll mid-year following a qualified special enrollment period event — such as birth, adoption, change in residence, becoming eligible for a premium tax credit or losing other coverage. To accommodate for the period of time in which they would be otherwise uninsured, an individual may purchase STLDI.
STLDI is, importantly, not minimal essential coverage (MEC), not required to cover essential health benefits and limited in coverage. The individual may still owe an individual mandate penalty, but the policy provides protection for some health care costs. Currently, an individual may only be covered under STLDI for a maximum of three months. The Order encourages the Departments to propose regulations that allow individuals to continue STLDI coverage for a longer period of time.
Finally, the Order encourages the Departments to consider proposing regulations or revising guidance to increase the usability of HRAs; more specifically, the Order encourages the use of HRAs with non-group coverage.
As background, a large employer may currently only offer and maintain an HRA when it is integrated with a major medical group plan. The HRA cannot reimburse the cost of individual policy premiums. A small employer who does not offer a group health plan may reimburse the cost of individual policy premiums through the use of a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). The maximum reimbursement under a QSEHRA is $4,950 per employee. In the proposed regulations, the Departments may consider increasing the annual maximum QSEHRA contribution or provide a way for large employers to reimburse the cost of an individual policy through an HRA.
Cost-Sharing Reduction Subsidies
Also on Oct. 12, 2017, the White House announced that the administration will not continue payment of cost-sharing reduction subsidies. As we’ve reported in the past, these payments provide reduced cost-sharing – for example, deductible, copayments and coinsurance – to lower income individuals who purchase an individual health policy through the exchange and have household income between 100 percent and 250 percent of the federal poverty level.
Although CSR subsidies have been the subject of ongoing litigation, both the Obama and Trump administrations have been continuing payments during ongoing legal proceedings. Without payments from the administration, the insurers will still be required by the Affordable Care Act to provide the subsidies — which is why this issue has been the driving factor behind insurer decisions to pull out of the individual market in 2018 and increase premiums to better account for increased cost.
What Happens Now?
From here, the Departments will begin the traditional rulemaking process. The Order indicates that the DOL shall consider proposing regulations related to AHPs (within 60 days), while all three Departments shall consider proposing regulations related to STLDI (within 60 days) and the expansion of HRAs (within 120 days). Following the issuance of proposed regulations, the Departments will receive public comments. Final regulations won’t be issued until the comments are considered and evaluated by the Departments.
This process won’t be completed in 2017 and will continue into early 2018.
What Does This Mean for Individuals and Employers?
Looking ahead, employers may have alternatives available to them. Joining AHPs or reimbursing individual policy premiums through an HRA are both on the table, but for now nothing has changed.
Many employer groups are currently preparing for their 2018 offerings with renewal discussions and open enrollment. Those decisions and efforts should continue, as these announcements have no immediate impact on 2018 group coverage. Similarly, individuals who are preparing to purchase individual coverage for 2018 will be able to do so starting Nov. 1, 2017. The options and rates for those individual policies were finalized before the announcement regarding the payment of cost-sharing reduction subsidies.
As always, we’ll continue to watch for future developments that affect employers and their health care plans. Please contact your advisor with any specific questions.
Executive Order »
HHS CSR Announcement »