HRB 133 - 1) Executive Order Directing Modifications to the Affordable Care Act; 2) Termination of Cost-Sharing Reductions in Individual Policies; 3) PCOR fee adjustment; and 4) Updates on Preventive Health Services
Released October 16, 2017 I Download as a PDF
Executive Order Directing Modifications to Affordable Care Act
An Executive Order, signed on October 12, 2017, promotes modifications of certain aspects of the Affordable Care Act (ACA) (also see press statement). In a nutshell, this Executive Order directs the ACA’s governing agencies (Health and Human Services/Labor/Treasury) to address three elements: formation of association health plans, expansion of short-term, limited-duration insurance, and expanding the rules to allow individual premium to be reimbursed through health reimbursement arrangements (HRAs). Briefly, this Executive Order directs the governing agencies to:
1. Develop ways to expand access to association health plans (AHPs) for small employers. The intended result would allow AHPs to be available to small businesses that are in the same line of business to join together to offer healthcare coverage to their employees, either through existing organizations or new ones established, for the express purpose of offering group coverage. Formation of AHPs would also allow the purchase of insurance across state lines. Presumably, the Executive Order is suggesting that the regulatory agencies loosen the ERISA rules governing multiple employer welfare arrangements. This would also require coordination with state laws governing association-type plans.
2. Expand short-term, limited duration benefit plans which are generally intended to fill temporary coverage gaps when individuals transition between coverages. These types of plans are generally exempt from many of the ACA’s insurance market reform mandates. Regulations issued last year restricted these types of policies to a 3-month duration to coordinate with the short-term coverage gap exemption from the minimum essential coverage (MEC) requirement. It is unclear at this point whether any newly designed short-term policies would meet the requirements of MEC, and thus, could put individuals at risk for the individual shared responsibility penalty.
3. Expand the rules surrounding health reimbursement arrangements (HRAs) to allow payment of individual premium. Under current law, an HRA can only reimburse individual health premium if the HRA is a retiree-only HRA, or a qualified small employer HRA (QSEHRA).
These agencies are directed to provide their recommendations relating to AHPs and short-term limited duration plans by December 11, 2017; the HRA recommendations are due by February 9, 2018. Further, these agencies are obligated to provide progress reports of their efforts to both the President and Congress by April 10, 2018, and every two years from that date.
It is important to remember that this Executive Order does not change the law as it stands today. As matters evolve, we will provide you with the relevant information. In the meantime, the ACA’s insurance market reform requirements and all other aspects of the ACA remain in effect.
Termination of Cost-Sharing Reductions in Individual Policies
The Departments of Health and Human Services and Treasury, by way of a Department of Justice opinion, have announced that the cost-sharing reductions authorized under the Affordable Care Act will cease immediately. The cost-sharing reductions are monies paid to insurers to help offset co-payments and other out-of-pocket costs for certain lower income individuals whose income falls below 250 percent of the federal poverty level and who obtain their coverage through the marketplace. Insurers will continue to be obligated to provide these cost-sharing reductions to eligible individuals but will not receive reimbursement from the federal government.
To this end, insurers have, and will, continue to incorporate this additional cost into premium. In effect, this ultimately increases the premium for coverage. For those obtaining coverage through the marketplace and receiving a premium subsidy, the increased premium will impact the amount of the federal subsidies requirement. As a reminder, the premium subsidy is not impacted with the roll-back of the cost-sharing requirements. Those not entitled to premium subsidy will feel the primary burden of the premium increase.
The day following the announcement of the cost-sharing reduction, state attorneys generals from 18 states and the District of Columbia filed a lawsuit challenging the cost-sharing funding roll-back.
PCOR Fee Adjustment
The IRS has released the adjusted applicable dollar amount for the Patient Centered Outcome Research (PCOR) fee. For policy and plan years ending between October 1, 2016, and October 1, 2017, the PCORI fee was $2.26. The fee increases to $2.39 for policy and plan years ending between October 1, 2017 and October 1, 2018, according to IRS Notice 2017-61. As background, the PCOR fee is assessed on the average number of lives covered under the policy or plan. The fee is required to be reported annually to the IRS on the second quarter Form 720 and paid by its due date, July 31st.
Updates on Preventive Health Services
- Broadened Accommodations for Women’s Health Services
The ACA governing agencies (HHS/DOL/IRS) published two sets of interim final regulations on October 13, 2017. These regulations allow virtually any entity, excluding government entities, with sincerely held religious or moral opposition to the women’s preventive mandate of the ACA, specifically, contraceptive services, to opt-out of providing these benefits. The regulations do not specifically define what constitutes sincerely held religious or moral convictions, but suggests this determination will be made in accordance with state law; how this will play out is unclear.
Religious Accommodations. Historically, houses of worship (churches) have been the only entities entitled to a full exemption from the women’s preventive services mandate. Certain religiously affiliated organizations, including certain closely-held entities, have been able to obtain an accommodation warranting that such entities would not pay for such services, resulting in participants obtaining the excluded services directly from insurers or third party administrators.
These interim final rules significantly broaden the entities entitled to receive the accommodation, or the exemption, at their discretion. Virtually, any non-government plan, including one sponsored by closely-held and publicly traded entities, private entities, as well as institutions of higher education and private universities offering student health coverage, can either choose the accommodation, i.e., the insurer or third party administrator would provide the services at no cost to their population for some or all of the contraceptive services, or choose to be exempt altogether from providing some or all contraceptive services.
Accommodations based on Moral Convictions. Further, a slightly narrower group of entities, specifically, all non-government, non-publicly traded entities, can claim a moral opposition to providing contraceptive services and seek either the accommodation described above, or an exemption, in accordance with the second set of rules.
HRSA Exemption. The specific types of contraceptive benefits and services are based on the women’s preventive services guidelines issued by the Health Resources and Services Administration (HRSA). Employers, plans and insurers with a religious or moral objection to providing contraceptive services are exempt from penalties by way of these interim rules for failure to abide by the HRSA recommended guidelines. HRSA has updated its women’s health guidelines accordingly.
Participant Communication. Any employer-sponsored group health plan subject to ERISA should exercise caution if it intends to remove this benefit. In this event, plan sponsors are obligated to communicate the change in benefits to plan participants as a result of removing the benefit. The communication to plan participants can be accomplished by way of providing a summary of material modification.
Effective Date: These interim final rules became effective on October 6, 2017. Comments relating to these rules may be submitted to the governing agencies until December 5, 2017. In the interim, lawsuits challenging these regulations are being contemplated.
- Vision Screenings for Children
The Affordable Care Act requires health plans to cover certain preventive services, without imposing any cost-sharing requirements (co-pay, co-insurance, or deductible), when such services are delivered by in-network providers. The types of covered preventive services, some of which are recommended by the U. S. Preventive Services Task Force (USPSTF), are updated periodically.
Since the updated list of preventive services in Health Reform Bulletin 131, the USPSTF released its recommendation In September, 2017 for vision screenings, at least once, in all children ages 3 to 5 years to detect amblyopia or its risk factors. Generally, compliance with USPSTF recommendations becomes applicable as of the first plan year beginning one year following issuance of the recommendation.
A complete list of ACA-required preventive services can be accessed from the USPSTF website, as well and the Healthcare.gov website.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Kansas City office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.