An executive order was signed by President Donald Trump on October 12th for the purpose of exploring ways to expand rules for association health plans (AHP), to revise existing Affordable Care Act (ACA) rules in order to allow for the purchase of individual, and small-group plans, that are not required to include all of the ACA’s mandates for coverage and to consider changes to Health Reimbursement Accounts (HRA).
Since the executive order was directed towards individual and small-group plans most large employers will see little or no impact. Large groups as defined by the ACA are considered employers with 100 or more employees. The ACA does give states the right to establish small group classifications with less than 50 employees, however, many states have decided to use the ACA’s definition of small-group as being less than 100.
Association Health Plans
The order directs the Secretary of Labor to consider expanding access to AHPs. This may allow employers to form groups across state lines through a broader interpretation of the Employee Retirement Income Security Act (ERISA).
“The direction the order takes is to liberalize the rules to build large insurance pools of small employers. Spreading the risk across large numbers of participants in an insurance pool is thought to bring insurance premium stability,” said Perry Braun, executive director of Benefit Advisors Network (BAN). “It will be interesting to see what new entrants enter the market to aggregate small businesses to build the large pool of clients.”
Short-term Limited Duration Insurance (STLDI)
The order directs the Departments of the Treasury, Labor, and Health and Human Services to consider expanding coverage through low cost short-term limited duration insurance (STLDI). One of the main cost drivers of the ACA are the many coverage mandates. STLDI plans are average one-third of the cost of the lowest cost Obamacare plans. One reason for the cost difference is that STLDI plans are not subject to many of the costly mandates and regulations.
Health Reimbursement Arrangements
The order directs the Departments of the Treasury, Labor and Health and Human Services to consider changes to Health Reimbursement Accounts (HRA). HRAs are set up by employers as a way to reimburse employees for qualified medical expenses, such as, deductibles, copays, and coinsurance that is an employee’s responsibility under the group medical plan.
Rule revisions may allow for employees to use HRA funds to pay premiums for individual plans purchased through the individual market. This feature was previously allowed and then subsequently taken away by the ACA.
In summary, any rule changes affected by the executive order may be months away from implementation. The order does not make any changes to existing rules. It merely is directing agencies to issue new regulations and/or guidance. Any proposed regulations must follow the standard public notice and comment process.
In a separate order, the administration announced that cost-sharing payments that help subsidize deductibles and out of pocket costs for some plans purchased through an ACA Marketplace exchange would be terminated. This does not impact the premium subsidies for low-income individuals and families purchasing coverage through an exchange.
The administration determined that the CSR payments that have been made to insurance companies were not legal because the funds were not appropriated by Congress. The ACA does appropriate funds for premium subsidies but does not for CSR payments. The prior administration had requested an appropriation from Congress in order to make CSR payments. Congress to not grant the appropriation so the Obama administration went ahead and made the payments through section 1324’s permanent appropriation.
Attorney General Jeff Sessions provided a legal opinion on October 12th to Health and Human Services, and the Treasury, that included an order to stop CSR payments immediately, and until a valid appropriation exists.