HR Management & Compliance

Republican ACA proposal poses challenges for multistate employers

A group of Republican senators has proposed a replacement bill for the Affordable Care Act (ACA) that would allow states to choose whether to keep Obamacare’s provisions in place. Because employers’ requirements would depend on where employees work, compliance could be a real challenge for companies with operations in multiple states, according to the Society for Human Resource Management (SHRM).

The bill is seemingly an attempt to gain bipartisan support, but lawmakers on both sides have expressed dissatisfaction with its provisions, said Chatrane Birbal, SHRM’s senior adviser for government relations.

Senator Bill Cassidy (R-LA), the bill’s main sponsor, assured lawmakers that the bill is the best option when introducing the legislation January 23. “It has been a Republican principle that power is best held by individuals and states, not the federal government,” Cassidy said. He also said that is the best way to achieve President Donald Trump’s goal of providing affordable access to coverage, including for individuals with preexisting health conditions.

The Senate minority leader, however, disagreed. The proposal would create chaos, not affordable health care, Senator Chuck Schumer (D-NY) told lawmakers.

What the bill does

The Patient Freedom Act of 2017 (S. 191) would afford states three options: (1) keep Obamacare; (2) adopt a new option that is spelled out in the bill; or (3) design their own, alternative solution.

Under “option 2,” a state would participate in a new market-based system and receive funding equal to 95 percent of federal premium tax credits and cost-sharing subsidies as well as the federal match for Medicaid expansion, according to a fact sheet accompanying the bill. States could choose to receive funds in the form of per-beneficiary grants or refundable tax credits. In either case, funds would be deposited in individuals’ “Roth health savings accounts (HSAs),” a new type of account that differs from traditional HSAs in that deposits are taxable.

For states that choose option 2, individuals would be automatically enrolled in default health coverage and Roth HSAs, with the right to opt out. That would keep premium prices down, Cassidy said.

Under the bill, employers’ responsibilities would be contingent on where employees work. If an employer has workers only in option 2 states, it will no longer have to offer health insurance to at least 95 percent of its full-time workforce or face a fine or comply with the ACA’s reporting requirements. However, if it has employees in option 1 states, the ACA’s requirements would remain.

That arrangement could be problematic for multistate employers, especially those with self-insured plans, according to Birbal. Those plans are regulated by the Employee Retirement Income Security Act (ERISA) and are not subject to state insurance regulations. The bill doesn’t seem to recognize ERISA preemption, Birbal said.

ERISA has provided employers with a workable framework for employee benefits, allowing them to offer a uniform set of benefits to employees, Birbal said. “SHRM believes that the flexibility and certainty of the ERISA framework has been essential to the success of the employer-based system and should be maintained.”

The bill leaves intact other parts of the ACA in all states, such as market reforms like the ban on preexisting condition exclusions and the requirement to cover dependent children through age 26. Also remaining in place is employers’ responsibility to provide breaks and spaces for nursing mothers to express breast milk. The ACA amended the Fair Labor Standards Act (FLSA) to require such breaks, and the proposed bill doesn’t undo that amendment.

Overall, this was a good first attempt by lawmakers to meet in the middle, Birbal said, “but I suspect . . . in the coming months, we’re going to see a number of bills that are going to be introduced.”

SHRM made several requests in a letter to Congress earlier this month, including a call to maintain the flexibility afforded by ERISA. Birbal said the letter still represents the organization’s priorities.

As for the individual mandate, Cassidy said his bill would allow fans of Obamacare to stay with it. “Republicans think that if you like your insurance, you should keep it,” he said. “California and New York: you love Obamacare; you can keep it.”

The Center for American Progress, a liberal think tank, said Cassidy’s statement was disingenuous. “If you happen to live in a state controlled by those who oppose Obamacare, they would be able to gut your coverage,” the organization’s vice president for health policy, Topher Spiro, said in a statement. “It’s unconscionable that access to quality health care would depend on where you happen to live.”

Senators Susan Collins (R-ME), Shelley Moore Capito (R-WV), and Johnny Isakson (R-GA) also sponsored the bill. If passed, the bill would take effect January 1, 2018. Cassidy said Representative Pete Sessions (R-TX) is expected to introduce a companion bill in the House.