On October 12th, following months of failed congressional actions to repeal and replace the Affordable Care Act (ACA), President Trump used his administrative authority to issue a far-reaching executive order that directs the departments of Treasury, Labor, and Health and Human Services (HHS) to “consider” changes to current regulations so that (1) HRAs could be used to cover insurance premiums and be offered without associated group coverage, (2) association health plans (AHPs) could be offered across state lines, and (3) the availability of short-term and limited-duration insurance could be expanded. The executive order does not include details on these requested revisions or provide any substance on how these changes would be implemented, so the CDH industry will continue to meet with and provide feedback to these agencies as they work to implement the executive order.
According to the statement released by the White House regarding the executive order issued on October 12th, the executive order will “improve access, increase choices, and lower costs for healthcare” by targeting “three areas for improvement in the near-term.” Below we examine those three proposed changes.
1. Expansion of HRA coverage and availability
The executive order was issued to all three agencies, giving them 120 days from the date of the order to reconsider regulation or revise guidance “to increase the usability of health reimbursement arrangements (HRAs), to expand employers' ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non-group coverage.”
Possible regulatory revision by the agencies could include reconsideration of a 2013 Internal Revenue Service (IRS) guidance governing HRAs, to allow the use of HRAs to purchase coverage on the individual market.
Under IRS Notice 2013-54 issued in September of 2013, an employee cannot use funds from a stand-alone HRA to purchase individual health insurance on a tax-favored basis. Under this guidance, an HRA can only be made available to employees who are enrolled in qualifying employer-sponsored major medical coverage, with the employer otherwise subject to a penalty.
The CDH industry generally supports this proposed change and welcomes the expanded options a stand-alone HRA could provide to employers and employees who seek affordable healthcare insurance options.
2. Association Health Plan (AHPs)
The executive order issued to the Department of Labor (DOL) gives them 60 days from the date of the order to consider regulations “expanding the current rules regarding Association Health Plans (AHPs) to potentially allow an AHP to be offered across state lines to organizations within the same line of business or allow organizations in a state or metropolitan area to form an AHP.” These AHPs would not be allowed to exclude any employee from joining the plan or to develop premiums based on health conditions.
This is an attempt by the Administration to limit the impact of ACA market reforms by reinterpreting ERISA to allow AHPs to form across state lines. This would enable AHPs to get out from under state regulations and instead allow them to be regulated as part of the large group market. Because plans in the large group market are not subject to the same rules as plans in the individual market, AHPs would be able to offer narrower, cheaper coverage.
However, it is important to note that the executive order does not define an "association" or clarify who will be eligible to participate. Individual insurance market advocates are concerned that this executive order could destabilize the individual market by pulling healthier individuals out of the risk pool and into cheaper, less expansive AHPs. Alegeus and the CDH market will continue to monitor how the DOL addresses this executive order.
3. Short-term and limited-duration insurance
The executive order issued to all three agencies, giving them 60 days from the date of the order to “consider whether to expand the availability of low-cost short-term and limited-duration insurance.”
Short-term and limited-duration insurance is typically used as a means to obtain coverage when transitioning from one job to another and is exempt from many of the ACA's market reforms, such as guaranteed issue and the prohibition on lifetime and annual dollar limits. In 2016, President Obama changed the definition of “short-term” and “limited-duration” insurance from coverage lasting up to 12 months to coverage lasting less than three months. In response to this executive order, the agencies may change the definition/timeframe of these plans again. No other details are currently available, so the CDH industry will work with the Administration and the three agencies as they implement President Trump’s executive order.
Read the executive order issued October 12th.
Join us to learn more!
Alegeus will host a webinar that examines the possible HRA opportunity offered by this executive order, looks at the legal and regulatory impacts and pitfalls, and provides HRA best practices. The date, time and speakers will be announced soon.
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