Even Without the American Health Care Act, Employers May Still Find Relief in 2017

There were significant news reports and commentary about the American Health Care Act, the House of Representative’s proposal to repeal and replace the Affordable Care Act (ACA), and its demise in March. However, there has been less publicity about two other bills moving through Congress that could have a positive impact on employer plan sponsors. Additionally, while many employers subject to the ACA hope the recently debuted “MacArthur Amendment” to the American Health Care Act and other potential legislation will bring changes to tracking, reporting, and potential shared responsibility penalties, more recently enacted laws and executive action may offer welcome relief for impacted employers.


New Legislation Under Consideration

Two bills aimed at protecting or reforming current employee benefits laws have passed the House of Representatives and await consideration by the Senate.

 

The first is the Self-Insurance Protection Act (H.R. 1304). The bill is intended to exclude stop-loss policies obtained by self-insured health plans or plan sponsors of self-insured group health plans from the definition of “health insurance coverage” under ERISA, the Public Health Service Act, and the Internal Revenue Code. Doing so pre-empts states and the federal government from attempting to regulate stop-loss coverage as traditional health insurance.
Stop loss coverage essentially protects a self-insured plan sponsor or employer against the financial burden of large claims. If enacted, the act ensures employer access to the added protection of stop loss, which benefits both employers and employees.

On April 5, 2017, the House of Representatives voted on the bill, which received bipartisan support with only 16 Democrats opposing it. The bill is currently in the Senate Committee on Health, Education, Labor and Pensions (HELP Committee) awaiting consideration.

 

The second bill, the Small Business Health Fairness Act (H.R. 1101), amends ERISA to establish a certification process for association health plans (AHPs), such as group health plans offered by bona fide trade, industry, or professional associations or a bona fide chamber of commerce. These associations must exist for purposes other than providing or obtaining medical care and, among other things, must be in existence for a continuous period of at least three years to be certified. Associations can either purchase insurance coverage or self-insure their plans. AHPs may be available across state lines and would not be subject to state multiple employer welfare arrangement (MEWA) regulations. (Currently, plans offered by a bona fide group or association of employers are MEWAs and subject to state regulation.) The bill provides criminal enforcement provisions and requires consultation between the Department of Labor and the state where the AHP will be considered primarily located.

 

The bill establishes extensive requirements for AHPs to obtain certification, with even more requirements for those plans that self-insure. Some specific requirements include establishing a board of trustees, and compliance requirements related to participation and coverage, nondiscriminatory contribution rates, plan documents, and voluntary termination. Self-funded plans must, among other things, meet additional participation level, surplus, stop-loss, and reserves requirements.

 

On March 22, the bill passed the House of Representative (236 – 175). It is currently in the Senate HELP Committee awaiting consideration. While association plans are not a new concept, if enacted, the bill may give more employers the opportunity to provide affordable health coverage options to employees through greater negotiating power and benefit from larger risk pools. More information about this bill is available in the House’s Education and the Workforce Committee fact sheet.


New Laws Effective in 2017

On December 13, 2016, the 21st Century Cures Act was enacted into law and was effective January 1, 2017. The act included a provision allowing certain small employers to help employees pay premiums for individual insurance premiums and other health care expenses through tax-preferred arrangements called qualified small employer health reimbursement arrangements (QSEHRAs). To be eligible to offer a QSEHRA, an employer cannot be an applicable large employer under the Affordable Care Act and cannot offer a group health plan to any employees. These arrangements also must meet several conditions. For example, employers must make 100 percent of the contributions and offer it to all full-time employees. The maximum contribution is $4,950 for single coverage and $10,000 for family coverage per 12-month plan year.

 

For 2017, sponsoring employers were required to notify eligible employees about the QSEHRA by March 13, 2017; however, the IRS issued Notice 2017-20 extending that deadline to no later than 90 days following guidance the IRS will issue regarding contents of the notice requirements. For 2018 and beyond, employers are required to notify eligible employees about the QSEHRA at least 90 days before the year for which the QSEHRA is provided, while newly eligible employees must receive notice by the date they are eligible. Penalties apply for failure to timely notify eligible employees in certain circumstances. While the IRS will issue more guidance regarding the notice, pursuant to the law, the notice must include the amount of the benefit available to eligible employees under the arrangement; a statement that eligible employees should notify the Marketplace of the QSEHRA benefit if applying for advance payment of the premium tax credit; and a statement that if the eligible employee does not have minimum essential coverage for any month, then they may be liable for an individual shared responsibility payment (“individual mandate” penalty under § 5000A of the Internal Revenue Code) for that month and any reimbursements made under the QSEHRA may be includible in gross income.

 

Employers are encouraged to work with counsel or another trusted advisor to determine eligibility to offer a QSEHRA and ensure they meet other requirements under the act, including funding requirements, reimbursement limits, and employee eligibility requirements.


Existing Law Benefitting Small Employers Extended

On February 23, 2017, the Centers for Medicare & Medicaid Services extended transition relief for small businesses that have certain non-ACA compliant policies, commonly referred to as “grandmothered” policies. These policies are available in certain states and regulated under applicable state laws. The transition policy is not new; it was originally implemented in 2014 and has been extended several times. The recent extension applies to policies beginning on or before October 1, 2018 that end no later than December 31, 2018.

 

The transition relief only applies to small group policies that have been in place since 2013, if permitted by the respective state’s insurance laws and offered by the carrier. Although the provisions vary somewhat from state to state and carrier to carrier, grandmothered policies generally are exempt from the ACA’s requirements on community premium rating standards, guaranteed availability and renewability, and coverage of essential health benefits, to name a few. Carriers renewing coverage under the extension must meet certain notification requirements specified in the announcement.
In summary, while lawmakers determine the next steps with the nation’s health care reform laws, employers must continue with business as usual under the ACA, other employee benefits laws currently in place and new legislation effective this year.