A recent Executive Order from President Donald Trump aims to give employers greater latitude in banding together to purchase health coverage, and in subsidizing employees’ coverage through health reimbursement arrangements (HRAs).
Executive Order (EO) 13813, issued October 12, is designed to “expand choices and alternatives to Obamacare plans and increase competition to bring down costs for consumers,” according to a White House press release. It follows the repeated failure of legislative attempts to repeal and replace the Affordable Care Act (ACA).
EO 13813, published October 17 (82 Fed. Reg. 48385), directs the U.S. Department of Labor (DOL) to consider regulations or guidance that would allow more employers to form association health plans (AHPs), make it easier for employers to satisfy “commonality of interest” requirements under existing DOL rules, and “consider ways to promote AHP formation on the basis of common geography or industry.”
On the HRA front, the DOL and the U.S. Departments of Health and Human Services (HHS) and the Treasury are to look for ways “to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.” The EO also calls on these agencies to consider expanding the availability of short-term limited duration insurance (STLDI).
The idea of AHPs allowing smaller employers to purchase insurance collectively is a longtime staple of Republican health policy. The HRA and STLDI provisions are aimed largely at reversing ACA-related restrictions imposed by the Obama administration.
The U.S. Chamber of Commerce expressed support for EO 13813. “The small group health insurance market remains volatile, hamstrung by few choices and increasing premiums. Businesses—especially small businesses—continue to struggle to provide health care coverage that their employees value and can afford,” said Randy Johnson, the Chamber’s senior vice president for labor, immigration, and employee benefits. “We appreciate the administration’s efforts to expand access to more coverage options, lower premiums, and offer greater benefit flexibility.”
Another employer group, the American Benefits Council (ABC), praised EO 13813’s call to broaden HRAs. Doing so would give employers “more flexibility in the benefits they offer employees,” said Katy Spangler, ABC senior vice president for health policy, in a statement. “The Council is a long-time supporter of giving employers more tools for their tool boxes, and this Executive Order directs the agencies to do just that.”
However, the advocacy group Families USA denounced the move. Rather than ensure affordable, quality health coverage, “President Trump’s executive order moves the nation in exactly the opposite direction by allowing the sale of junk insurance, luring healthy customers out of comprehensive plans protected by the safeguards in federal law,” according to Frederick Isasi, the group’s executive director. “Likewise, the executive order could significantly impact existing state insurance pools, decimating the protections under current law to ensure that people with preexisting conditions are able to obtain coverage that meets their needs.”
Some state officials expressed opposition. “Each of these concepts proposed in the president’s orders would seriously undermine our health insurance markets if allowed to stand alone,” said Washington state Insurance Commissioner Mike Kreidler in a statement. “Combined, I fear they could do irreparable damage.”
While it seems reasonable to let small employers band together to buy health insurance, for example, “it ignores the reality of how insurance works,” Kreidler explained. “Trump’s executive order will allow healthier and younger people to pick skimpier, cheaper coverage, leaving the older and the sick to pay much more.”
Currently, AHPs generally are subject to many of the ACA requirements that apply to the individual and small group market, and may also be subject to the onerous federal and state rules that govern multiple employer welfare arrangements (MEWAs), according to Susan Nash, partner at Winston & Strawn LLP—and advisory board member for BLR’s Employer’s Guide to Fringe Benefit Rules. To gain the more favorable treatment that applies to single large employers, a group of employers must show it is a “bona fide” association that has a purpose unrelated to health benefits and exercises control over the plan.
As a result of EO 13813, HHS’ Centers for Medicare and Medicaid Services “could reverse or revise its sub-regulatory guidance applicable to associations, thereby making it easier for AHPs to be treated as large employers for ACA purposes,” according to an analysis that Nash prepared along with other Winston attorneys. “It is also possible that the DOL, acting on the Order, could make changes to the MEWA rules by loosening restrictions on the requirements to be a bona fide association.”
Such changes could enable small employers or even individuals to band together to provide fully insured or self-insured coverage as a large group, which would exempt them from many of the more restrictive ACA requirements, Winston observed. However, some states might decide to toughen their own MEWA measures to fill any perceived void.
Regarding HRAs, EO 13813 makes it likely that the DOL, HHS, and Treasury will loosen their requirements that an HRA be “integrated” with group coverage for ACA compliance purposes, according to Nash and her colleagues. “This may allow employers to offer HRAs to a wider set of employees. It also may open the door for large employers to offer HRAs that reimburse premiums for individuals who purchase individual health coverage.”
In past ACA guidance, the agencies have maintained that a “stand-alone” HRA for active employees—for example, to subsidize their purchase of individual health insurance—will violate the ACA’s ban on annual dollar limits, since the HRA itself is treated as a group health plan for ACA purposes. The 21st Century Cures Act passed in December 2016 carved out a narrow exception for certain small-employer HRAs.
| David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.
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