Phia Group Media

rss

Phia Group Media


Final Individual Coverage HRA Rule Released

By: Andrew Silverio, Esq.

Recently, the Trump administration released a finalized rule establishing the conditions under which employers can utilize HRAs to subsidize their employees’ purchase of individual coverage, including coverage on the Exchange.

Under the rule, employers are able to provide enrollees with a fixed dollar amount, tax exempt, which can be used to buy individual coverage.  While the rule doesn’t relieve the employer’s obligations to provide group coverage, if applicable, participation in the individual coverage HRA is conditional upon having individual coverage, which includes Medicare.  This requirement is applicable for the employee and any dependents.  Additionally, the individual coverage must satisfy certain requirements to qualify under the rule, allowing an individual to utilize the ICHRA, and individuals must attest that they have suitable individual coverage.

Notably, the model notice and attestation (available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Notice-PDF.pdf and https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Attestations-PDF.pdf) provided by the administration contain no disclosure or explanation that certain coverage, such as certain limited-benefit plans or health sharing ministries, would not satisfy the rule’s requirements relating to the suitability of other coverage.

Critics of the rule have pointed to a few plausible factors in arguing that it will raise the price of individual coverage in the exchanges, both by incentivizing sicker employees within a workforce and employers with sicker employee populations overall to feed high risk lives into the individual markets.  Additionally, it has been noted that older participants may not benefit sufficiently from the ICHRAs, because the limitations on how much the contribution amounts can differ based on age will be insufficient to compensate for the naturally disproportionate premiums those participants will encounter in the individual market.

Finally, the content of the rule aside, the quick turnaround time of a 01/01/2020 effective date is leaving state marketplaces scrambling, with many saying it will be simply impossible to implement sufficient changes in just a few months to be equipped to manage enrollment accurately under the new rule.

This is a significant development, with implications in the ACA, tax code, employment law, and other fields.  Court challenges are likely, but as of now the rule stands to go “live” in just a few months.  Reach out to The Phia Group at PGCReferral@phiagroup.com with any questions or for more detailed information on any of the rule’s contents.


Will Sex Discrimination be Re-Defined?

By: Erin M. Hussey

Section 1557 of the Affordable Care Act (“ACA”) prohibits discrimination on the basis of race, color, national origin, sex, age, or disability with regards to certain covered entities’ health programs. A covered entity is one that receives federal funding as outlined in the ACA.

The US Department of Health and Human Services (“HHS”) has issued a proposed rule that would revise the regulations implementing and enforcing Section 1557. This proposed rule, among other things, would essentially allow HHS not to include “gender identity” and “termination of pregnancy” within the definition of “sex discrimination.”

By way of background, HHS’s 2016 regulation on Section 1557 redefined sex discrimination to include gender identity and termination of pregnancy. However, on December 31, 2016, a US District Court issued a nationwide injunction on certain parts of Section 1557, including gender identity and termination of pregnancy, and that injunction is still in effect. As such, this proposed rule would follow suit with that injunction. HHS details that this part of the proposed rule would “not create a new definition of discrimination ‘on the basis of sex’ . . . [but] would enforce Section 1557 by returning to the government's longstanding interpretation of ‘sex’ under the ordinary meaning of the word Congress used.”

In addition, plans that are not directly subject to Section 1557, must still ensure that the employer sponsoring that plan remains in compliance with Title VII of the Civil Rights Act. Title VII prohibits employment discrimination based on race, color, religion, sex and national origin. The Equal Employment Opportunity Commission’s (“EEOC’s”) interpretation of its prohibition on sex discrimination includes discrimination based on gender identity and sexual orientation. However, there have been similar discussions of whether sex discrimination should be redefined under Title VII. HHS detailed this issue in their fact sheet on the proposed rule:

“On April 22, 2019, the U.S. Supreme Court granted petitions for writs of certiorari in three cases, which raise the question whether Title VII’s prohibition on discrimination on the basis of sex also bars discrimination on the basis of gender identity or sexual orientation.”

Therefore, while we wait to see if the proposed rules on Section 1557 are finalized, and for the outcome of the above-noted Supreme Court cases on Title VII, applicable health plans should remain cautious with regards to benefits and exclusions that may implicate sex discrimination issues. If you feel as if you are being discriminated against and would like to negotiate a fair rate, visit our claim negotiation page to learn more. 


Too Early to Worry About 2020? Never!

By: Kelly Dempsey, Esq. & Corrie Cripps

ACA changes are few and far between these days – a lot of talk, but not a lot of action…yet. There are two things health plans should pay attention to and one is likely a welcome change. The less exciting of the two is a quick update to the preventive care rules, while the more exciting proposal is relating to the exclusion of certain prescription drug charges from the out-of-pocket maximum. While this proposal doesn’t solve all the drug copay card problems at once, it’s a step to help plans control prescription drug spend.   

New Preventive Care Guideline
The United States Preventive Services Task Force (USPSTF) issued a brand new “B” recommendation on February 12, 2019. The new recommendation requires plans to provide interventions to prevent perinatal depression. The USPSTF found that counseling can help prevent perinatal depression in persons at increased risk, and recommends that clinicians provide or refer pregnant and postpartum persons who are at increased risk to counseling interventions.

As a reminder, this new recommendation impacts non-grandfathered plans. Non-grandfathered plans are required to provide coverage for certain preventive care services in-network at 100% with no cost-sharing. Included in the list of services are USPSTF guidelines with an A or B rating. Employers that offer robust medical plans, as well as limited medical benefit plans, such as preventive only plans, will need to make the necessary modifications. Timing of applicability of new recommendations is a little confusing, as such, Phia’s best practices are to implement new guidelines into plans with the first plan year beginning on or after the recommendation is issued.

Drug Copay Cards and Out-of-Pocket Maximums
Annually the U.S. Department of Health and Human Services (HHS) issues proposed regulations with benefit and payment parameters. Generally this just means employers and plans are put on notice regarding inflation updates to certain figures such as the ACA out-of-pocket maximum limits. This year HHS is throwing a likely welcome curveball - HHS has proposed to allow self-insured group health plans to except certain cost-sharing from the maximum out-of-pocket limit if certain things occur related to prescription drugs. The rule would allow plans to exclude from the out-of-pocket totals the amount the plan must pay when a plan participant selects a brand drug when a medically appropriate generic drug is available and amounts associated with drug manufacturer coupons for specific prescription brand drugs that have a generic equivalent.

 


To RBP, or Not to RBP: That is (one) of the Question(s)

By: Ron E. Peck, Esq.

Why do employers offer health benefits to employees?  Some might point to the Patient Protection and Affordable Care Act (“PPACA” or “ObamaCare”) and say the law forces them to do so.  Yet, prior to the law’s passage in 2010, many (if not most) employers voluntarily offered health benefits to their employees.  There are a number of reasons for this, but suffice it to say, it was meant to attract and retain the best talent.

Indeed, once upon a time, health benefits were just that – “benefits.”  Now, it’s assumed health insurance is included in an employment package, and what was once a benefit is now an entitlement.

Why does this matter?  It matters for many reasons, but as it relates to reference-based pricing, or “RBP,” it matters insofar as RBP ultimately – more often than not – puts the patient (“a/k/a” the employee or their family) in the crosshairs when disputes arise between providers of healthcare services, and the benefit plans that utilize an RBP pricing methodology.

Perhaps – long ago – when health benefits were welcomed as “icing on the cake,” the fact that an individual may be limited in who or whom they could utilize for care, or risk being balance billed the difference between what the plan pays and what the provider charges, would not have been so onerous.   The employee might have thought, “Heck!  It’s better than nothing; and I suppose I could avoid the bill by selecting a provider that works with my plan.”

Today, however, not only do we expect to receive health benefits, but we are outraged when our out of pocket expenses increase.  This attitude, on the part of plan participants, is anathema to RBP.

At the same time, recall that RBP is a response to changing opinions as they relate to networks, and PPOs.  Looking back in time, one of the values inherent in PPOs was a discount off of provider billed charges.  It was assumed – “back in the day” – that the billed charges against which the discount applied were reasonable, and as such, getting discounts on top of reasonable charges had value.  The fact that the provider, by agreeing to accept the network rate as payment in full, had the secondary impact of protecting patients from balance billing, was just icing on the cake.

Today, however, we recognize that billed charges are so exorbitant, that network discounts do next to nothing to counter the abuse, and thereby are worthless.  As a result, the thing that once was a secondary benefit of network enrollment – balance billing protection for the patient – has become, more or less, the only valuable element of a network.  Yes; if asked why they are still using a network, most plans would not state it’s for the discount, but rather, it’s to avoid balance billing and protect patients.

Thus, we must ask ourselves – how much will we pay to avoid balance billing and protect patients?  If a provider charges $60,000, there is a discount of 30% ($18,000), $42,000 is thus expected as payment, and the reasonable fee is $5,000, is it worth $37,000 to protect the patient from balance billing?  If not, what will you pay – instead – to protect patients, if anything?

This is ultimately the question every plan contemplating RBP must ask itself.  How much more, beyond reasonable charges, am I willing to pay to protect my plan participants?

Piling onto this, politicians, lawmakers, regulators and courts seem more than happy to offset the rising cost of healthcare onto the benefit plans as well.  From FAQs released by the DOL, indicating that a failure to offer “adequate access” (“a/k/a” a network) will result in balance billed amounts counting against maximum out of pockets – and thus make the remainder of the billed charges owed and payable by the plan, to court decisions overturning previous rulings that determined hospitals can’t force patients to agree to pay whatever the hospital charges and sought to calculate fair prices when no fee was agreed upon, those in power seem dead set on allowing providers to charge whatever they want, and protect patients from any undue out of pocket expenses – by forcing plans to either contract with providers, or pay the cost.

I have personally advocated for working directly with providers, identifying value, and finding ways to create win-win scenarios without increasing how much the plan pays; instead offering providers things of value – other than cash – that incentivizes them to accept plan maximums as payment in full.  Yet, this effort is put into serious jeopardy whenever anyone “forces” a plan to enter into contracts or networks with providers.  Politicians and providers seem to treat (or want to treat) “networks” like a silver bullet.  The issue is, however, that networks are just a nice label for a “contract.”  If any rule or law “requires” a payer to enter into a contract with a payee, and failure to do so results in penalties for the payer, it puts an unfair advantage in the hands of the payee.  One key to successful negotiation – whether it be a provider network deal, buying real estate, or settling a law suit – if both sides don’t have something to gain, something to lose, and the freedom to leave the table, the “deal” won’t be fair.

As a result, the DOL FAQs, case law, and proposed laws that would “force” a payer (plan, carrier, etc.) to broaden their network, and force them to sign a deal with a provider, will result in one-sided deals, as providers know that the payer cannot “leave the table” without a deal.

These are all things one must consider when asking themselves whether to RBP or not to RBP.


The Government Shutdown's Impact on the Texas v. U.S. Case

By: Erin M. Hussey, Esq.

By now, most Americans, especially those in the healthcare industry and proponents of the ACA, are aware of the December 14, 2018 decision in Texas v. United States by Judge O’Connor of the Northern District Court of Texas. This decision shook the self-funded healthcare industry as it ruled that the individual mandate was unconstitutional and not severable from the rest of the Affordable Care Act (“ACA”), thus concluding that the ACA itself is unconstitutional.

More recently on January 3, 2019, the House filed a motion to intervene, and detailed that they have a “unique institutional interest in participating in this litigation to defend the ACA.” This motion was to intervene in separate claims that were made by the plaintiff states which were not ruled on in the December 14th decision. However, on January 7, 2019, the House filed a second motion to intervene which, if granted, would allow the House to defend the ACA alongside the intervenor states. The House argues that they have the right to defend the constitutionality of federal laws when the Attorney General or the Department of Justice (“DOJ”) do not.

However, this process will be slowed down as the government shutdown continues. The shutdown, which began on December 22, 2018, is interfering with the DOJ’s ability to meet the deadline to file their opposition to the House's motion. As a result, the DOJ asked the Fifth Circuit to pause all briefings since they will be unable to prepare their motion as Justice attorneys cannot work during the shutdown. On January 11, 2019, the Fifth Circuit issued an order, signed by Judge Leslie Southwick, granting the DOJ’s request to temporarily pause the case. While this shouldn't have a deep impact on the case, it presents just one example of many of how the government shutdown is impacting the country.


A Texas Judge Strikes Down Obamacare – Our Take

By: Brady Bizarro, Esq.

We have been covering Texas v. United States since the case was filed in February of this year. The suit, brought by 18 state attorneys general and 2 Republican governors, represented the most serious threat to the Affordable Care Act (“ACA”) since the GOP’s efforts to repeal the healthcare law failed last summer. On Friday, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas ruled that the entire ACA is unconstitutional since Congress eliminated the individual mandate in a 2017 tax bill. His decision has rattled the markets, Democratic political leaders, advocacy groups, and the broader healthcare industry. After taking a closer look at this ruling, however, we agree with the many legal experts who have concluded that this ruling is not as earth shattering as the headlines make it appear.

First, Judge O’Connor’s ruling did not block enforcement of the ACA. All of the existing provisions of the ACA with which employers, fully insured plans, and self-funded plans must comply are still in effect. This decision has no effect whatsoever on plan design, on cost containment, on employee incentives, or on regulatory compliance. A quick check of Healthcare.gov reveals that federal officials have even added this reassuring message: “Court’s decision does not affect 2019 enrollment coverage.”

Second, a spokeswoman for the California attorney general has already confirmed that the 16 states (and D.C.) that defended the law will appeal this ruling to the Fifth Circuit Court of Appeals in New Orleans. That means there is a chance that this decision could be overturned before the case reaches the Supreme Court. That possibility brings us to our third point; that legal scholars across the ideological spectrum have found the legal arguments made by the plaintiffs in this case to be remarkably unpersuasive. To understand why, let us break down the court’s opinion (which sided with those arguments).

Judge O’Connor’s opinion had two major elements. First, he contended that since Congress reduced the ACA’s individual mandate penalty to $0, the mandate to purchase insurance must be invalidated. Then, he argued that since the individual mandate is essential to and inseverable from the remainder of the ACA, the entire healthcare law must be struck down. This issue of “severability,” or whether one provision of a law can be severed without invalidating the entire law, is key.

When the ACA was passed in 2010, the bill contained a requirement that all Americans purchase health insurance or pay a penalty. The Supreme Court ruled in 2012 that this requirement, known as the individual mandate, was a legitimate exercise of Congress’s constitutional authority to tax. Nothing in the original 2010 bill spoke to the severability of the individual mandate. Importantly, however, Congress did in 2017 when it eliminated the individual mandate in the Tax Cuts and Jobs Act (“TCJA”) of 2017 and preserved the rest of the ACA. Judge O’Connor’s explanation for this fact is that the 2017 Congress was unable to repeal the individual mandate because of budget rules and it therefore had no intent with respect to the individual mandate’s severability. In fact, Judge O’Connor spends most of his 55-page opinion attempting to discern the intent of the 2010 Congress instead of interpreting this later legislative act.

The political response to this ruling has been rather expressive. One prominent Democratic senator remarked, “This is a five alarm fire – Republicans just blew up our healthcare system.” Indeed, we could go on at length about the consequences if this ruling were to stand; the impact on employer-sponsored plans, the effect on those with pre-existing conditions, the potential loss of health insurance coverage for millions of individuals, and the end of the Medicaid expansion. Yet, based on the response from the legal community and our own legal analysis, our position is that this decision rests on shaky ground. This decision also goes much further than even the Trump administration had wanted. In short, we should all hold our collective horses and conduct business as usual for the time being.


Responding to a IRS Letter 226J: Considerations and Common Mistakes

By: Krista J. Maschinot, Esq.

If you are an applicable large employer (ALE), the Internal Revenue Service (IRS) could possibly be sending a Letter 226J notice your way. Will you be ready to respond accurately within 30 days of receipt if needed?

We discussed in a recent blog post that IRS enforcement of the Employer Shared Responsibility Provision of the Affordable Care Act (ACA) is very real and ALEs should be prepared as such.

There are two types of ESRP penalties that the IRS will assess based upon the information the ALE provided on Forms 1094-C and 1095-C:

§4980H(A) – Assessed when an employer fails to offer minimum essential coverage to enough of its full time employees

§4980H(B) – Assessed when an employee enrolls in the Marketplace and qualifies for the premium tax credit because the employer failed to offer affordable coverage

We recommend comprehensively reading and reviewing the information provided in the Letter 226J as to the reasoning for ESRP penalties and ensuring that this matches up with your internal documentation. This review is particularly significant because it will help you determine whether you have made an administrative/filing oversight or if there are larger compliance issues to deal with.

There are common mistakes to be aware of based on how Forms 1094-C and 1095-C were filled out that could trigger a Letter 226J. An ALE could, for instance, forget to check the “Section 4980H Transition Relief” box (Box C of line 22) on Form 1094-C. It may also fail to correctly code Line 14 of Form 1095-C regarding offer of coverage based on months offered coverage, as opposed to months of actual coverage. These types of errors are easy enough to make, but it is important to identify that they have been made prior to responding to the IRS. The monetary penalties will be assessed much differently based on filing mistake rather than actual ESRP non-compliance.


Trump Administration Finalizes ACA Contraceptive Mandate Exemption Rules

By: Patrick Ouellette, Esq.

Amid broader health policy discussions around the Affordable Care Act (ACA), the Trump Administration recently, and somewhat quietly, released new final rules that would expand the scope of the ACA contraceptive mandate exemption to potentially include more types of employers. The two rules are “Exemptions for Religious Beliefs” (CMS-9940-F2), aimed at large, publicly traded companies, and “Exemptions for Moral Convictions” (CMS-9925-F), which is geared toward nonprofit organizations and small businesses.

The intent of these rules was to extend the availability of the exemption to employers that, if they do not necessarily have sincerely held religious beliefs, can use “moral convictions” to oppose services covered by the ACA’s contraceptive mandate protections. If these rules sounds familiar, they should because the Department of Health and Human Services (HHS) released interim versions in October 2017 that were meant to accomplish the same goals. The most recent iteration of the rules were meant to be final, as they will take effect 60 days after their publication in The Federal Register, or in January 2019. Interestingly HHS estimated that the exemptions “should affect no more than approximately 200 employers with religious or moral objections, with many entities not being affected because they were already permitted not to cover contraceptives under the previous rules, or are protected by permanent court injunctions.”

Employers that have been closely monitoring HHS contraceptive mandate enforcement since 2017 and waiting to determine whether they qualified for religious exemptions would now have more a more concrete legal basis after the rules are published to make a contraceptive coverage decision either way. However, as my colleague Kelly Dempsey cautioned in January 2018, employers and TPAs should be wary of the litany of states that have already sued the Trump administration over the 2017 rules and the potential for more lawsuits against the administration.

As it stands now, the states that have sued include Pennsylvania, California, Washington, and Massachusetts. Delaware, Maryland, New York and Virginia joined California in its suit. The California and Pennsylvania attorneys general suits resulted in federal judges granting nationwide injunctions against the 2017 proposed rules, but both are currently under appeal. There will likely be more litigation in response to CMS-9940-F2 and CMS-9925-F; the new rules have also drawn scrutiny from groups such as the American Civil Liberties Union.


Healthcare on the Ballot, and a Free Side of Fries

By: Ron E. Peck

If you are looking for a blog post listing specific healthcare related questions appearing on ballots, and a technical assessment of each, look elsewhere.  If you were hoping for a dissection of candidates advertising heavily their support or opposition to the Affordable Care Act, and how that position will likely effect their likelihood of being elected (and what they says about the population’s attitude regarding healthcare and “Obamacare”), you can find a million articles on that topic somewhere else.  My goal is to step back and assess the big picture.

I’ve read that “healthcare” is the biggest topic on most voters’ minds.  That makes me laugh, because “healthcare” is such a broad topic, it captures everything.  Further, it is something about which most people are painfully misled or ignorant.

In many other areas, some politicians basically say: “I want more of this.  If I do what I want, these great things will happen…” and the opponent says, “Yes… but that thing will cost this much, and we will need to pay for it with higher taxes.  It’s a nice idea, but not worth the money.  We have more important things to do with that money.”  Voters then decide whether that “thing” is worth the cost.

When I was in the 6th grade, we held a mock election.  I was one of two presidential candidates, and was up against Zach.  In the primaries, we all had discussed things that were important to us, and realistic goals we had for our classmates in the coming year, and apparently the majority of kids agreed with me and Zach.  So we get to the election, and during our debate, Zach unleashes a barrage of questions about topics I’m sure he didn’t understand (that his parents fed him)… I mean… what 6th grader is asking another about their position on abortion; am I right?  Regardless, when faced with this ridiculous assault, me and my team resorted to the age old strategy of smearing the other candidate.  My team and I brought up every nasty thing Zach had ever done to someone else.  I won, though I’m not proud of it.  That year I learned that smear campaigns work.

The next year was my first year of junior high school.  We promptly began elections for student council, and given the previous year’s success, I was sure I had it in the bag.  That’s when another candidate did something I’d never seen, and will not soon forget.  He made promises.  He promised better food in the cafeteria; longer recreation periods between classes; and more.  By the time he was done, I was ready to vote for him too!  The issue?  After he won, nothing happened.  Why?  Because no one could realistically pay the cost of delivering on those promises.

Fast forward only a few years (yeah right), and here I sit.  I witness before me politicians promising to maintain (or – gasp – expand) health benefits and coverage, without addressing the cost of doing so.  The opposition, meanwhile, can’t whip out the old reliable “anti-promises” stick (also known as the “we don’t want higher taxes” campaign), because – unlike almost all other issues politicians debate – we have privatized a huge portion of healthcare taxes.  Make no mistake.  When we force people to either pay a penalty or buy insurance, and the money that we all contribute is used to pay for “things” that benefit society… and when we increase the size and scope of those “things” and the resultant payments we all make to purchase insurance increases … that is the same as an increase in taxes.  The problem is that by privatizing this tax as “insurance,” we dumbfound politicians and confuse the public.

No one will look at an image of a sick child, and argue they should not receive care.  No one is “pro-illness” or “pro-death” and “anti-healthcare.”  Yet, anytime anyone argues that buying more healthcare without assessing what we’re buying, or more importantly, the price of what we’re buying, they are labeled as those things… and worse.

Meanwhile, the voting public is blissfully unaware of how increasing coverage on the one hand, will cost them more on the other hand.  Our healthcare payment system is so convoluted, people don’t see how an action today will cost them down the line.  For most, mandating coverage for this condition or expanding coverage to that person is – in their mind – free.  The only one who suffers is the “greedy insurance companies.”  Bottom line?  If you order a cheeseburger, and I ask if you want fries with it… and I tell you the fries are free… YOU AREN’T GOING TO SAY NO TO THE FREE FRIES!

Sadly, many insurance carriers and benefit plans do suffer from inefficiencies and other issues that result in them receiving too much, and handing out too little.  It is true that for some payers, they could “tighten the belt” a little, to ensure more is covered without passing the cost onto everyone else.  But, for the most part, what people don’t understand, is that along with the people working for the carrier, they too – the policy holders – are also part of the so-called “insurance company.”  The money used to pay for healthcare comes from the pockets of the patients and policyholders.  Whether it be through contributions to a self-funded plan or premiums paid to a carrier, we – as the people paying the bills – deserve to know that our plan or policy is being managed prudently and effectively.  We have a right to demand that the carrier or plan is not wasteful or too focused on profits at our expense, and that they are coordinating with providers of healthcare to ensure we have access to care at an affordable price.  As the ones “footing the bill” we should rest assured that everyone involved has the information they need to achieve an exchange of consideration that doesn’t overly favor one party or abuse another.

I have no issue with making efforts, legally or otherwise, to expand healthcare and improve the overall health and wellbeing of my fellow Americans.  My concern is that until people truly understand the cost of healthcare, and who’s ultimately paying for the fries (in the form of an upcharge on the burger), people won’t make educated decisions or first assess our current spending to identify and eliminate inefficiencies BEFORE we throw more money at the problem.

But then again… what do I know?  I couldn’t even win my student council election.


The Proposed HRA Rules v. the Current Regulatory Landscape

By: Erin M. Hussey, Esq.

On October 23rd, the Department of Labor (“DOL”), Department of the Treasury (“Treasury Department”), and the Department of Health and Human Services (“HHS”) issued proposed regulations on health reimbursement arrangements (“HRAs”). An HRA is a tax-free account coordinated with a group health plan, funded by the employer that reimburses employees for health care costs.

The goal of these proposed rules is to provide more options for affordable healthcare. Specifically, these proposed rules allow integrating an HRA with individual health coverage, provided that certain conditions are met. In sum, the following details the Departments’ various proposed rules:

“. . . the [Treasury Department] and the Internal Revenue Service (IRS) propose rules regarding premium tax credit (PTC) eligibility for individuals offered coverage under an HRA integrated with individual health insurance coverage. In addition, the [DOL] proposes a clarification to provide plan sponsors with assurance that the individual health insurance coverage the premiums of which are reimbursed by an HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain conditions are met. Finally, [HHS] proposes rules that would provide a special enrollment period in the individual market for individuals who gain access to an HRA integrated with individual health insurance coverage or who are provided a QSEHRA.”

Under current IRS guidance via IRS Notice 2013-54 (“Notice”), HRAs fail to satisfy the Affordable Care Act’s (“ACA”) prohibition on annual dollar limits and the ACA preventive care requirements unless they are coordinated with a group health plan that satisfies those ACA provisions. The Notice further clarifies that an HRA for active employees (otherwise called a stand-alone HRA) cannot be integrated with individual market coverage, regardless of the coverage being obtained inside or outside of the exchange. However, the above-noted newly proposed HRA regulations would allow employees with HRAs to shop for coverage in the individual market. This would allow small employers and businesses to utilize this potentially cheaper option to pay for their employees’ health coverage. Additionally, the proposed rules indicate that if an applicable large employer (“ALE”) subject to the Employer Mandate utilizes their HRA to pay for their employees’ individual health insurance premiums on the marketplace, it would be considered an offer of coverage to satisfy the Employer Mandate.

It is important to keep in mind that prior to these proposed regulations, the 21st Century Cures Act, effective January 1, 2017, allows businesses with fewer than 50 employees to reimburse their workers for out-of-pocket healthcare costs and premiums on the individual market, otherwise known as Qualified Small Employer Health Reimbursement Arrangements (“QSEHRAs”). Small business owners must meet two requirements before becoming eligible to offer QSEHRAs to employees: (1) the small business owners do not offer a group health plan to their employees; and (2) the small business owners must have fewer than 50 full-time employees, as defined in IRC 4980H(c)(2) (the Employer Mandate). QSEHRAs can reimburse premiums for ACA exchange plans, individual policies and Medicare supplemental policies.  This stems the obvious question—how are QSEHRAs any different from the new HRA proposed rules? One difference is that QSEHRAs only apply to businesses with fewer than 50 employees, whereas the proposed rules apply to any size employer. Additionally, the newly proposed rules allow a plan sponsor to offer any size HRA to be integrated with individual health insurance coverage and offer a traditional group health plan, but the plan sponsor of a QSEHRA cannot offer a group health plan at all.

As detailed above, under the proposed rules an employer could offer a traditional group health plan in addition to the HRA integrated with individual health insurance. However, the concern is that adverse selection would result and unhealthy employees would be placed into HRAs so that the traditional group health plans do not take on as much risk. In order to avoid this health factor discrimination, the rules allow a form of discrimination in accordance with the different “classes” of employees when determining which classes of employees will be offered the HRA integrated with individual health insurance coverage and which will be offered the traditional group health plan (if the employer provides both). These classes are (1) full-time employees; (2) part-time employees; (3) seasonal employees; (4) employees covered by a collective bargaining agreement; (5) employees who have not satisfied a waiting period for coverage; (6) employees who have not attained age 25 prior to the beginning of the plan year; (7) non-resident aliens with no U.S. based income; and (8) employees whose primary site of employment is in the same rating area. As the proposed rules indicate “a plan sponsor may offer an HRA integrated with individual health insurance coverage to a class of employees only if the plan sponsor does not also offer a traditional group health plan to the same class of employees.”  For example, the employer could offer only the traditional group health plan to full-time employees and only the HRA integrated with individual health insurance to part-time employees, but they cannot be offered both.

Lastly, another important component of these proposed rules is that they would establish excepted benefit HRAs. Excepted benefits include vision, dental, etc. Under current HRA guidance, HRAs can only pay for medical expenses, but under these newly proposed rules an HRA paired with a group health plan could pay up to $1800/year for “excepted benefits” such as an individual’s dental or vision premiums. However, there are conditions for an excepted benefit HRA outlined in the proposed regulations.

The Departments are asking for comments on all aspects of the proposed rules by December 28th. It will be interesting to see how much “opportunity” commentators believe this may bring for individuals seeking more affordable healthcare.