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scentedrunawayshark · 3 years

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The Differences between HDHP and Catastrophic Health Insurance Plans

If you’re looking for health insurance with low premiums, you may think that either a catastrophic health insurance plan or a high deductible health plan will do.

But while they may seem like the same thing, these plans differ in many ways, particularly regarding eligibility, availability, and tax advantages. Be sure you understand how each one works and which one is the best way to protect yourself and your household.

Contents [hide]

What Is a High Deductible Health Plan?

What Is Catastrophic Health Insurance?

Let TrueCoverage Find the Right Coverage for You

Eligibility

Coverage

Premiums

Deductibles

HDHPs and HSAs

HDHPs and HRAs

Eligibility

Coverage

Premiums

Deductibles

Obtaining a hardship exemption

Catastrophic Plans and HSAs

Availability

What Is a High Deductible Health Plan?

A high deductible health plan (HDHP) is a tax-advantaged way to provide flexibility with your health care spending today and help you save for future medical expenses. An HDHP can protect you against extreme out-of-pocket medical expenses. It’s also called an “HSA-eligible” plan because it combines a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA) with traditional medical coverage.

Eligibility

Anyone who meets an HDHP’s requirements can enroll. HDHPs are widely available in and out of the Marketplace. Many employers only offer this kind of plan. You must purchase an HDHP during open enrollment or a Special Enrollment Period.

Coverage

With an HDHP, you must pay off your annual deductible before your plan kicks in with in-network providers. However, as with catastrophic plans, ACA mandates that HDHPs cover certain preventive care benefits regardless of whether you’ve met your minimum yearly deductible.

Preventive care benefits include but aren’t limited to:

Prescription drugs

Emergency services

Hospitalization

Lab work

Pregnancy and maternity/neonatal care

Mental health/substance abuse

Rehabilitative services

Vision or dental coverage, if your state requires it

Remember: though these preventative services are covered, you are responsible for the full cost of non-preventive services up to your deductible.

Premiums

HDHPs usually come with lower monthly premiums than similar traditional health plans with a lower deductible. If you don’t expect to have many high medical expenses, an HDHP can help you save money throughout the year. This kind of plan also works well for people who can afford to self-insure up to the deductible amount.

Deductibles

As the name suggests, HDHPs carry a higher deductible and out-of-pocket maximum than a traditional health insurance plan. According to the IRS, an HDHP for 2021 is any plan carrying a deductible of at least $1,400 for an individual or $2,800 for a household. Its total annual out-of-pocket expenses, including deductibles, co-payments, and coinsurance, can’t exceed $6,900 for an individual or $13,800 for a household. Premiums aren’t included in these amounts.

HDHPs and HSAs

Most HDHPs let you contribute to an HSA, which lets you pay for out-of-pocket healthcare costs with pre-tax dollars. The account earns tax-free interest, and withdrawals for qualified medical expenses don’t get taxed, either. You must be enrolled in an HDHP for you and your employer to contribute to an HSA.

When you enroll in an HDHP, the plan determines if you’re eligible for an HSA based on your information. You will qualify for an HSA if you:

• Are enrolled in an HDHP and not covered by other health insurance, including Medicare • Have not received VA or Indian Health Service medical benefits within the last three months • Aren’t claimed as a dependent on someone else’s tax return • Aren’t covered by your own or your spouse’s flexible spending account (FSA)

HDHPs and HRAs

An HRA is an employer-funded account that allows tax-free withdrawals for qualified medical expenses. An HRA is not portable — you forfeit credits if you switch health plans or leave federal employment. You can’t contribute to an HRA, and the account does not earn interest as an HSA does.

You do not have to use up all your HSA or HRA contributions in a single year; unused amounts roll over to the following year.

What Is Catastrophic Health Insurance?

Catastrophic health insurance plans can also be an economical way to protect yourself from medical expenses that could arise from a serious illness or injury. They are also called major medical insurance plans. The cost and availability of these plans vary by state and insurance provider.

Catastrophic health insurance plans can make sense for people who can’t afford traditional health insurance but want protection for emergencies. Such a plan may meet your needs if you want a lower-cost health insurance plan and can handle paying out-of-pocket for minor medical expenses. Expect a higher deductible — similar to an HDHP — compared to what you’d pay with a traditional health insurance plan.

Eligibility

Only people under 30 or those with a hardship exemption can purchase a catastrophic health plan. This exemption is based on the inability to afford insurance through an employer or the Marketplace. Certain other hardships may apply, including the death of a family member. If you qualify to buy a catastrophic plan, you’ll see some listed when you compare Marketplace plans.

Coverage

Catastrophic health plans cover the same essential health benefits you can get with other Marketplace plans. They will also pay for some preventive services in your plan’s network at no cost. Catastrophic plans also cover at least three annual primary care visits even if you haven’t met your yearly deductible.

Premiums

Catastrophic health insurance plans typically feature low monthly premiums because they are in a separate risk pool from the Affordable Care Act’s metal-level plans. However, you can’t use an ACA premium or cost-sharing subsidy with a catastrophic plan. If you are eligible for a premium tax credit based on income, a Bronze or Silver traditional plan may offer you more coverage for less money than a catastrophic plan.

Deductibles

Deductibles are the amount you must pay on your own before your health plan starts to pay for anything. Once you have reached that threshold, your insurer pays for all covered services, with no coinsurance or co-payments. For 2020, the deductible for all catastrophic health plans was $8,150.

Obtaining a hardship exemption

The Trump administration expanded access to hardship exemptions in 2018, but many people are unaware that they may now qualify for one. However, obtaining a hardship exemption certificate from the exchange requires completing a lengthy application and several weeks of processing. This can be a challenge, considering that most states limit enrollment to the six-week open enrollment period.

Catastrophic Plans and HSAs

A health savings account (HSA) lets you contribute pre-tax dollars to an HSA-qualified, high-deductible health plan. Catastrophic plans can’t be HSA-qualified because they must cover at least three primary care visits before the deductible is met, and they have higher deductibles than high-deductible health plans. Catastrophic plan members can’t contribute to HSAs.

Availability

Catastrophic health insurance plans are available in and out of the Marketplace, but not everywhere. Sometimes, the lowest-cost insurer might not offer catastrophic plans. Even among those that do, the catastrophic plan is often more expensive than the Bronze plan.

Let TrueCoverage Find the Right Coverage for You

When you’re shopping for health insurance, expert guidance can empower you to choose the coverage that truly protects your health and your budget. TrueCoverage is the one-stop insurance shop for you and your family. We are a certified Marketplace provider, and we partner with over 600 trusted insurers to bring you more than 50,000 affordable health insurance options. Our knowledgeable customer service agents and cutting-edge technology are here to help you secure the best solution at the best price.

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maddockandassociates · 4 years

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ARPA Benefits Brief: COBRA Premium Subsidies

I hope you are doing well. Along with our law firm, Maynard Cooper, we are working our way through the benefits provision in the ARPA signed into law this month. We are still waiting on additional guidance from Rehn & Associates along with the processes and notices related to this change. Please be on the look out for future communications from us and Rehn & Associates with details on the new notices, changes to the existing COBRA process, collecting premiums, etc.

Even though we do not have all the details, we thought it would be helpful to share with you the latest updates Maynard Cooper has put together regarding the new COBRA subsidy:

COBRA Subsidy Provisions in the American Rescue Plan Act: Time is of the Essence for Employers

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), which is the latest round of federal economic stimulus legislation in response to the ongoing COVID-19 pandemic. The ARPA has several benefits-related provisions, the most notable of which is the COBRA premium subsidy and its related election period extension and notice requirements. As discussed in more detail below, these COBRA provisions, which apply to both fully insured and self-insured group health plans subject to COBRA, take effect as soon as April 1, 2021, which means that employers have a limited window of time to get familiar with and implement these provisions in order to avoid costly penalties for COBRA non-compliance.

COBRA Premium Subsidy

The ARPA establishes a COBRA premium subsidy, which will cover COBRA premiums at 100% for certain assistance eligible individuals (“AEIs”) during the period from April 1, 2021 through September 30, 2021 (the “Subsidy Period”). An “AEI” is a qualified beneficiary who is eligible for and elects COBRA for a period of coverage within the Subsidy Period due to a qualifying event of involuntary termination of employment or reduction of hours.

The employer (or, in some cases, the plan or insurer) will pay 100% of an AEI’s COBRA premium during the Subsidy Period and will be reimbursed by the federal government through a credit against payroll taxes or, for credit amounts exceeding payroll taxes, as a refund of an overpayment.

The Subsidy Period will last for six (6) months at most and may be shortened for AEIs who reach the end of their COBRA maximum coverage period (generally, 18 months) or who become eligible for coverage under Medicare or another group health plan (excluding coverage consisting of only excepted benefits, health FSAs, and qualified small employer HRAs (i.e., QSEHRAs)) earlier than September 30, 2021.

Extended Election Period

Individuals who do not have a COBRA election in effect on April 1, 2021, but who would be AEIs if they did, are eligible for the subsidy. In addition, individuals who elected but discontinued COBRA coverage before April 1, 2021, are eligible if they would otherwise be AEIs and are still within their COBRA maximum coverage period. These individuals may elect COBRA during the period beginning on April 1, 2021, and ending 60 days after they are provided required notification of the extended election period. Any election for these AEIs would be prospective only, and not retroactive to the date coverage was lost.

Plan Enrollment Option

The ARPA also creates a “plan enrollment option,” under which a plan may (but is not required to) permit AEIs to elect to enroll in a different coverage option (i.e., a different group health plan offered by the employer other than QSEHRAs, health FSAs, or coverage that offers only excepted benefits). An AEI has 90 days after notice of the enrollment option is provided to make the election. The different coverage option cannot have a premium that exceeds the premium for the individual’s existing coverage and must also be offered to active employees.

Notice Requirements

Group health plans must timely notify AEIs who become eligible to elect COBRA during the Subsidy Period of the subsidy’s availability. Plans must also provide notice to any individuals eligible to elect COBRA under the extended election period described above (i.e., any individuals who experienced a COBRA event due to an involuntary termination or reduction in hours and who are still within their 18-month maximum COBRA period) regarding the subsidy’s availability and the extended election period by May 30, 2021. These notice obligations can be met by amending existing notices or by providing the required notices in a separate document.

The ARPA directs the DOL to issue model notices by mid-April. Our preferred Cobra administrator, Rehn & Associates, will be sending out communication about these notices soon.

In addition to the above, plans must separately notify AEIs of their subsidy’s expiration between 45 and 15 days before the expiration date, unless the subsidy is expiring because the AEI has become eligible for coverage under another group health plan or Medicare.

#americanrescueplan #americanrescueplanact #cobra #arpa

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omcik-blog · 7 years

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New Post has been published on OmCik

New Post has been published on http://omcik.com/3-trump-health-benefits-executive-order-facts-for-agents/

3 Trump Health Benefits Executive Order Facts, for Agents

President Donald Trump signs the health executive order as members of Congress, cabinet secretaries and others watch. (Photo: White House)

President Donald Trump today signed an executive order that officially puts his administration’s weight behind the idea of letting small employers join together to form interstate health coverage purchasing groups.

Another provision could eliminate the current 90-day cap on the duration of short-term medical insurance coverage from a single issuer.

A third could lead to changes in the rules governing employer-sponsored health reimbursement arrangements.

(Related: Math Geniuses Size Up 5 ACA Change Ideas)

Trump signed the order during a brief ceremony in the Oval Office.

Health policy watchers have been discussing what were said to be leaked copies of order drafts, and speculating about what might be in the final version, for weeks. Trump himself tweeted that he expected the order to include an association health plan provision.

The White House today posted a copy of the order here, and a summary of the order here.

The White House streamed the signing ceremony for the order live on the web. A recording of the video is available here.

Trump said at the ceremony that the order will direct the heads of the U.S. Treasury Department, the U.S. Department of Labor and the U.S. Department of Health and Human Services to take steps to increase competition and choices in the health care market, and to promote the creation of new low-cost, high-quality health care options for consumers and employers.

“They will have so many options,” Trump said. “This will cost the U.S. government virtually nothing.”

Sen. Rand Paul, R-Ky., a senator who has argued in the past that some of the major Affordable Care Act change bills debated in the Senate were too weak for him to support, appeared at the signing ceremony to support the order.

Paul called the association health plan provision in the order “the biggest free-market reform in a generation.”

“This reform, if it works and goes as planned, will let millions of people get insurance across state lines at an inexpensive price,” Paul said.

Trump cited Paul’s presence at the ceremony as evidence that the executive order will make the situation better. “When you get Rand Paul on your side, it has to be positive,” Trump said.

Here’s a look at three facts about the order of possible interest to agents and brokers.

Sen. Rand Paul, R-Ky. (Photo: White House)

1. The order mostly spells out general goals for federal agencies.

In the order, Trump states that his administration will focus on improving regulations in three areas: fostering the creation of interstate association health plans; easing the rules that apply to short-term medical insurance plans; and expanding access to health reimbursement arrangements.

Trump says in the order, for example, that he wants small employers to be able to use interstate association health plans, or health insurance purchasing groups, to be able to enjoy the same benefits that large employers now enjoy when those large employers self-insure.

Trump does not say in the order exactly what he thinks the association health plans would look like, or how he expects the rules governing short-term medical insurance or health reimbursement arrangements to change.

Alexander Acosta (Photo: White House) 2. Trump does give some hints about what he and others in his administration dislike about the current regulations and how the regulations might change.

In the order, Trump does offer some specific advice for his cabinet secretaries.

Interstate Association Health Plans

Trump encourages Secretary of Labor Alexander Acosta to look for ways to support access to interstate association health plans by:

Loosening the rules for deciding what kind of an organization qualifies as an “employer” under Section 3(5) of the Employee Retirement Income Security Act of 1974 (ERISA).

Letting employers join together in health benefits purchasing groups if they’re in the same industry, or if they’re in the same area of the country.

Short-Term Medical Insurance

In a section on short-term medical insurance, Trump talks mainly about short-term medical insurance policy duration rules.

Until recently, state insurance regulators decided how long a short-term medical insurance policy could last. In some states, a policy could last almost a year.

Drafters of the Affordable Care Act excluded short-term medical insurance from the quality and underwriting standards that apply to major medical coverage.

An issuer of short-term medical insurance can, for example, refuse to sell coverage to people with cancer, and it can cap benefits at $50,000 per year, or leave out benefits for ordinary physician office visits.

A major medical coverage issuer must sell coverage without regard to the applicant’s health, provide unlimited annual and lifetime benefits, and provide coverage for a standard “essential health benefits” package.

Under the Obama administration, the U.S. Department of Health and Human Services (HHS), U.S. Department of Labor and U.S. Treasury Department joined together to cap the duration of short-term medical insurance from any one issuer at three months, to reduce the chances that consumers would try to use short-term medical insurance as an alternative to major medical coverage.

Discouraging use of short-term medical insurance as a major medical insurance alternative could protect consumers against unpleasant coverage gap surprises, and it could protect major medical coverage issuers against losing younger, healthier prospects to the short-term medical insurance issuers, Obama administration officials said when they completed work on the regulations.

Up till now, officials in the Trump administration had not talked much about the three-month cap on short-term medical insurance policy durations.

In the new executive order, Trump talks directly about the duration issue.

Trump encourages Acosta, Treasury Secretary Steven Mnuchin, and Eric Hargan, the new acting HHS secretary, to look at short-term medical insurance, and “consider allowing such insurance to cover longer periods and be renewed by the consumer.”

Health Reimbursement Arrangements

A health reimbursement arrangement (HRA) is a program that lets an employer make cash available for an employee’s health care expenses.

The employer, rather than the employee, owns the value stored in an HRA. In some ways, that makes HRAs less attractive to employees than health savings accounts, which are owned by the employee, because employers can decide whether departing employees can continue to keep and use any HRA value still available.

For many employees, however, an HRA may be more attractive than an HSA, because an employee can use an HRA with low-deductible health coverage, rather than the high-deductible coverage that must be used in conjunction with an HSA.

In the past, officials in the Obama administration and other administrations have tried to limit employers’ ability to let workers use HRA value to pay for individual health coverage. Some health policymakers fear that letting workers use HRA money to pay individual coverage premiums could accelerate small employers’ shift away from offering traditional, employer-paid group health benefits.

Trump says in his order that he wants his Treasury, Labor and HHS secretaries to come up with regulations, guidance or guidance updates to make HRAs more usable, to expand employers’ ability to offer HRAs to their employees, and “to allow HRAs to be used in conjunction with nongroup coverage.”

Calendar (Image: Thinkstock)

3. Mechanics

The executive order may not have any concrete effect on federal regulations, guidance or procedures, and any changes that do materialize could take many months, or years, to arrive.

Trump notes in the order that his secretaries must operate within the limits of applicable federal law, and within the budgetary and administrative requirements of the federal Office of Management and Budget.

The Labor secretary has 60 days to develop his association health plan proposals.

The Treasury, Labor and HHS secretaries have 60 days to develop their short-term medical insurance proposals.

The Treasury, Labor and HHS secretaries have 120 days to develop their health reimbursement arrangement proposals.

Cabinet secretaries also must put any regulations they develop as a result of the executive order through a public comment period, Trump says.

The politics of the public comment process could be tricky, both for the Trump administration and for the health insurance and benefits community.

In the past, for example, insurers and state insurance regulators have battled employer groups over association health plan proposals.

Short-term medical insurance proposals have led to fights between short-term medical issuers and major medical issuers.

HRA proposals often pit employers, employer groups and benefit plan administrators against insurers and insurance regulators.

Critics of the reform ideas in the executive order typically say they will weaken protections for patients and increase coverage costs, or hurt coverage access, for higher-risk individuals or employers.

— Read 5 Peeks at the Senate’s Small-Group Health Proposal on ThinkAdvisor.

— Connect with ThinkAdvisor’s Life/Health channel on Facebook and Twitter.

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isaacscrawford · 7 years

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Trump Executive Order Expands Opportunities For Healthier People To Exit ACA

On October 12, 2017, President Donald Trump issued an executive order concerning health care coverage. The White House also posted two summaries of the order. If carried into action, the provisions of the executive order would likely siphon healthy people from of the Affordable Care Act-compliant market, continuing a pattern of regulatory actions under the Trump administration that have undermined the ACA.

The executive order has several main components. First, it calls generally for expanding competition and choice in health care markets and for improving the information available to consumers while reducing reporting burdens (that would presumably be needed to make that information available). Second, it directs the Department of Health and Human Services, in cooperation with the Secretaries of Treasury and Labor and the Federal Trade Commission, to report to the President within 180 days and every 2 years thereafter on steps that could be taken to accomplish these goals.

The primary operative parts of the executive order, however, are provisions that direct the Departments of Treasury, Labor, and Health and Human Services to consider making changes in current regulations and guidance governing health care coverage in three specific areas. First, the executive order directs the Department of Labor to consider within 60 days new rules and guidance “to expand access to health coverage by allowing more employers to form AHPs [association health plans].”

Second, the order directs the three departments to consider within 60 days regulations to expand the maximum length of short-term, limited-duration coverage and to make it renewable by the consumer. Third, it directs the Departments of Treasury, Labor, and Health and Human Services to within 120 days consider revising rule and guidance “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 Order’s Case For Change

The executive order begins by reciting perceived failures of the Affordable Care Act (ACA): rising premiums for ACA coverage, reduced insurer participation in exchanges, and reduced exchange enrollment. There is some truth in these assertions. However, many of the problems the individual market is experiencing are certainly due to actions the Trump administration has taken to undermine ACA coverage, and there is good evidence that the ACA market could have stabilized absent those actions. This post, however, specifically addresses the Trump administration executive order, the legality of the measures it proposes, and their likely effects, not the claims it makes.

The Steps Between The Executive Order And Regulatory Action

It must be emphasized that this is only an executive order. It is not a change in the law or even in regulations. It is a direction to draft rules. Under the Administrative Procedures Act these agencies will first have to publish proposed rules and then receive and respond to public comments before publishing the rules in final form. The fact sheet accompanying the order acknowledges that regulations will proceed through notice and comment rulemaking. This will likely take months.

Indeed, rulemaking will likely be proceeded by studies by the affected departments, and any proposed and final rules will likely have to be reviewed by the Office of Management and Budget. Therefore, changes are unlikely to affect plans beginning on January 1 of 2018, although some changes may take effect mid-year.

Association Health Plans

The executive order first instructs the Department of Labor to expand the availability of association health plans under the Employee Retirement Income Security Act of 1974 (ERISA).

Legal Background

ERISA was adopted in response to the failure of several private sector retirement plans in the 1960s and was primarily intended to ensure the security of retiree benefits. It also, however, applies to “employee welfare benefit plans,” defined in ERISA to mean

any plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits. . .

Participants must be employees, former employees, or members of employee organizations and beneficiaries are their dependents.

Group health plans offered by employers or employee organizations are, therefore, governed by ERISA. ERISA group health plans are subject to various reporting, disclosure, and fiduciary requirements under ERISA itself. They are also subject to requirements imposed by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which prohibits, for example, denying employees coverage or charging them premiums based on their health status. Group health plans are explicitly subject to the Affordable Care Act’s health care coverage reforms

Group health plans as such, however, are not subject to state insurance regulation. ERISA contains a provision that preempts state law. This provision is subject, however, to certain exceptions, such as criminal law. The preemption provision, contains one particularly important exception—it does not preempt state laws regulating insurance. This leads to one of the most important distinctions in ERISA law: insurers that insure group health plans are subject to state laws and regulations—for example, mandates prescribing the services they must cover or regulations governing claims or marketing practices. But states cannot regulate the underlying employer-health plan that is insured. And they cannot—subject to an important exception described below—regulate self-insured plans, that is plans in which the plan sponsor rather than insurer bears the risk.

Over 60 percent of employees are in self-funded plans, including over 90 percent of workers in companies with 5,000 or more employees (although some self-funded plans are government or church plans not subject to ERISA). Because ERISA plans are not subject to state regulation, they can be and are in fact offered across state lines.

If associations, such as chambers of commerce, professional or trade associations, or just enterprising entrepreneurs who start up associations to attract healthy enrollees (formerly called “air breather” associations) could offer health plans as ERISA group health plans, they could conceivably be free from some state regulations and could market across state lines. They might also enjoy a second regulatory advantage: If an association covered more than 50 enrollees (and almost all would), it could conceivably be considered a large group plan under the ACA.

Many of the most important protections of the Affordable Care Act apply to individual and small group plans. These include the essential health benefit and metal-level requirements and several provisions intended to deter health plans from excluding or charging more to people with preexisting conditions—such as rules that limit the factors plans can consider in setting premiums, a requirement that all plans be considered part of a single risk pool, and a risk adjustment program to move funds from insurers that avoid high-cost enrollees to plans that cover them. Large group plans can avoid covering essential services like mental health care and substance use disorder treatment and, although they technically are not supposed to exclude preexisting conditions or charge higher rates to people with them, they are in fact less constrained in doing so.

Large group plans remain subject to some ACA rules: they must cover preventive services and adult children up to age 26, and cannot exclude preexisting conditions or impose annual or lifetime limits. But even here, protection may be limited. Annual and lifetime limits only apply to essential health benefits, and a restrictive interpretation of EHBs could seriously limit this protection.

If association health plans could market health coverage claiming to be self-insured large group plans, therefore, they could be free from state regulation and could market plans with skimpy benefits and find it easier to cherry pick healthy enrollees and avoid unhealthy one. This is obviously the goal of the Trump Executive Order.

But the matter requires closer inquiry. The Affordable Care Act defines “group health plan” by reference to the definition of the term in the Public Health Services Act. The PHSA, in turn, defines “group health plan” by reference to the ERISA definition of “employee welfare benefit plan,” but specifies that a “group health plan” provides coverage to employees and their dependents. Moreover, the ACA defines “group market” coverage as coverage through “a group health plan maintained by an employer.”

These definitions seem to leave little room for association health plans, which are by definition are not plans offered by an employer to employees. But here the law gets (even more) confusing. ERISA states that “employer” means “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.” It also defines “employee organization” to include not only labor unions and similar organizations but also “employees’ beneficiary association organized for the purpose in whole or in part, of establishing” and employee benefit plan. Finally, ERISA defines “multiple employer welfare arrangement” (MEWA) to mean “an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing” benefits such as health care” to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries . . .”

A Checkered History For AHPs

From the earliest days of ERISA, associations cropped up selling health coverage and claiming ERISA protection from state insurance regulation, identifying themselves as employer or employee associations. A number of these associations were scams, which defrauded their members and left millions of dollars of claims unpaid when they became insolvent. In 1982, Congress amended ERISA to give states regulatory authority over self-insured MEWAs and some regulatory authority to ensure solvency over insured MEWAs, including requiring them to be licensed and to submit financial reports (states, of course, retain regulatory authority over insurers that insure associations). States have much greater capacity and a far better track record of dealing with fraudulent association plans than the federal government. https://hpi.georgetown.edu/ahp.html Fraud by association plans continued, however, despite state regulatory efforts.

The Affordable Care Act did not outlaw association health plans. It took several steps to limit their abuses, however. First, it imposed reporting requirements on MEWAs, imposed criminal penalties on MEWA fraud, and authorized the Department of Labor to take immediate action to deal with fraudulent MEWAs. It also dropped from the “guaranteed availability” provision of the PHSA an exception that had existed for bona fide association plans. An insurer that offers coverage through an association must offer the same plan to non-members who want it, if they can find out about it. Associations themselves are not subject to guaranteed availability requirements and will likely be able to find ways to winnow healthy from unhealthy applicants.

But most importantly, the ACA nowhere recognizes associations as having special status. Distinctions under prior law for “bona fide” associations, more or less disappear. The ACA simply defines large group, small group, and individual plans, without reference to how they are offered. Association plans continue under the ACA, but under regulations and guidance, associations that offer coverage to individuals are subject to the individual market rules and associations that offer coverage to small groups are subject to the small group coverage rules. These include the essential health benefit requirements and rules intended to prohibit cherry picking.

There is, however, a possible exception to this regulatory approach. ERISA recognizes association health plans covering small groups under certain circumstances as single-employer large group plans. A group of small group plans could, that is, be treated as a single large group. To date the Department of Labor has interpreted this exception quite narrowly to apply only when a “bona fide” group of employers is bound together by a commonality of interest (other than simply providing a health plan) with vested control of the association so that they effectively operate as a single employer. Association plans offered by general business groups or that include individual members do not qualify, a position that the Department of Labor has reaffirmed as recently as this year. In a few states, pre-existing association plans reorganized as single trade or occupation plans to qualify for this exception and continued to operate.

The Executive Order Would Allow AHPs Broad Latitude To Cherry Pick Healthy Groups

The Trump executive order seems to propose broadening the single-employer exception. Each small group plan member of the single-employer group would still be an ERISA plan and arguably subject to the ACA’s small group requirements. But the administration seems to want to change this, treating them as large group plans. The order specifically states: “To the extent permitted by law and supported by sound policy, the Secretary should consider expanding the conditions that satisfy the commonality‑of-interest requirements under current Department of Labor advisory opinions interpreting the definition of an “employer” under section 3(5) of the Employee Retirement Income Security Act of 1974. The Secretary of Labor should also consider ways to promote AHP formation on the basis of common geography or industry.”

A regulation that would do this could do further damage to the ACA small group market, as associations would pick off healthy groups. They would limit benefits that are needed by high-cost enrollees, age rate to exclude older groups, and market only to healthy groups. Groups with older, higher-cost enrollees would remain in the ACA-compliant small group market, which would drive up premiums for these groups. The executive order says that the associations could not discriminate against unhealthy employees. But single employer associations do indeed discriminate against unhealthy small groups, and they could easily find ways to become unattractive to unhealthy employees, such as not covering services they need.

The ACA-compliant small group market has already been undermined by small groups purchasing generous stop-loss coverage and claiming to be self-insured, and by healthy groups remaining in transitional, grandmothered plans. The administration also announced earlier this year that the federally facilitated SHOP exchange would no longer sell small group coverage online. Association health plans could finish the ACA-compliant small group market off.

These association plans would still involve multiple employers and thus still be MEWAs. They would thus be subject to state regulation. They could not be sold across state lines free from any state oversight. Only if states decided not to exercise their regulatory authority or if the administration found some way to preempt state MEWA regulation, would sale across state lines exempt from state regulation be possible. ERISA does allow the Secretary of Labor to preempt some state regulatory authority with respect to specific plans or classes of MEWAs involving ERISA plans, something the administration seems to be considering, but even under this authority DOL cannot preempt state solvency requirements, or licensing or reporting authority with respect to solvency issues.

While there might be a path for the Trump administration to allow small group association coverage through ERISA MEWAs, the administration could not legally extend association coverage to individuals under ERISA. ERISA deals with group health plans that cover employees or former employees. Employee plans must have at least one employee. A self-employed person is not an employee, and a self-employed person’s spouse cannot be counted as an employee. Extending ERISA large group coverage, and ERISA state law preemption, to individuals would seem to be clearly contrary to the purpose and requirements of ERISA. The executive order does not seem to reach this far.

There is also a question as to whether, even if the administration could find a way to allow associations to sell coverage free of state regulation, this would really result in sale of insurance across state lines. Health insurance coverage is almost universally provided currently through network plans. Associations would have to form or rent networks wherever they did business, which would be an impediment to sale in multiple states. Even within a single state, however, associations could undermine ACA-compliant coverage.

Association coverage has long been opposed by the National Association of Insurance Commissioners because of its tendency to segment the individual market, undermine consumer protections, and lead to fraud and insolvency. The American Academy of Actuaries has raised the same concerns. Moreover, a primary argument for association health plans before the ACA—that they would aggregate the bargaining power of small groups to deal with insurers—is no longer relevant as the exchanges offer greater bargaining power than any association could.

When legislation expanding association health plans passed the House in 2004, it was opposed by over 1,000 state government, business, labor, consumer, and physician and provider groups, including many small business organizations and chambers of commerce. Twenty consumer and disease organizations signed a letter opposing association health plan legislation this spring. The administration is trying to achieve through executive fiat a result that Congress has consistently rejected.

Short-Term Coverage

The second part of the executive order deals with expanding short-term coverage. Short-term coverage has long existed to provide coverage for individuals in coverage gaps, for example, between jobs or between school and a job. It also, as the executive order notes, may be useful to people who want a broader choice of insurers or provider networks than are available through the exchange or who missed signing up during open enrollment.

HIPAA, the first attempt by the federal government to impose some regulations on the individual market, exempted short-term coverage from its regulatory grasp, presumably because the requirements HIPAA imposed, like requiring guaranteed availability or some form of continuation coverage, were not appropriate for short-term coverage.

The ACA simply adopted the HIPAA individual market definition, completely excluding short-term coverage from its grasp. Short term coverage is not subject, therefore, to the ACA’s guaranteed issue and guaranteed renewal requirements; age rating and cost-sharing limitations; prohibitions on health status underwriting, annual and lifetime limits, preexisting condition exclusion clauses; essential health benefit requirements; or any other consumer or market protections. Short term coverage is also exempt from many state law insurance mandates and regulations. Few states explicitly define or regulate short term coverage, but many specifically exclude it from state law requirements.

Under the ACA, however, an individual who had only short-term coverage and not some other form of ACA-compliant coverage would be out of compliance with the individual responsibility requirement and would have to pay the penalty for noncompliance.

Short term policies in fact generally offer skimpy coverage. They impose limits on coverage, omit benefits like mental health or maternity coverage, exclude coverage of preexisting conditions, and have higher out-of-pocket limits than ACA-compliant coverage. They also are very profitable to insurers who offer them, having much lower medical loss ratios than ACA-compliant coverage. Finally, they are cheap for people who qualify for them.

Neither HIPAA nor the ACA defined how short “short-term” is, but regulations that antedated the ACA required the term of coverage to be less than 12 months not taking into account any renewals to which the enrollee was entitled. In the fall of 2016, the departments of Labor, Treasury, and HHS promulgated regulations limiting shot term coverage to a period less than three months. This accords with the time period that individuals may remain without coverage without having to pay the ACA’s individual responsibility penalty. The policy contract and all application materials connected with enrollment also had to prominently display a warning stating that the short-term coverage did not satisfy the individual coverage mandate.

The regulation also provided that the less-than-three-month limit applies to any extensions “that may be elected with or without the issuer’s consent.” This provision was intended to keep insurers from indefinitely extending short-term coverage. The Departments, however, rejected the suggestion from commenters that individuals not be allowed to purchase short-term coverage if they had previously been covered under a short-term policy, deeming such a policy to be too difficult to enforce. Insurers are not therefore, actually prohibited from renewing short-term policies as long as they do not guarantee renewability, and some no doubt do.

Although some insurers have supported the three-month definition, others have pushed for restoring the less-than-one-year definition. The NAIC has argued that the issue should be left up to the states, but few states have in fact addressed the issue. In June, a number of Republican senators asked the administration to return to the prior definition.

Likely Consequences Of Allowing Full-Year Short-Term Coverage

Allowing individuals to choose full-year short-term coverage in lieu of ACA-compliant coverage could have several results. First, and most importantly, it could siphon off healthy enrollees from the ACA-compliant marketplace. This could leave the marketplace risk pool—but also the off-marketplace risk pool—with a higher-risk population, driving up premiums. It might also drive some insurers from the ACA-compliant market.

Second, full-year short-term coverage would deprive short-term product enrollees of essential ACA protections, such as coverage of preexisting conditions. And third, it would leave short-term enrollees without immediate access to ACA-compliant coverage if they had an accident or illness and needed more extensive coverage. Loss of short-term coverage would not qualify an individual for a special enrollment period; thus, an individual enrolled in short-term coverage would not be able to move to ACA-compliant coverage until the next open enrollment period.

Fourth, allowing full-year short term coverage could cause consumer confusion, with consumers who enroll in short-term coverage believing they are getting health insurance.

It is not clear whether the administration will try to make short-term coverage minimum essential coverage, thus freeing people who enroll in it from the individual responsibility penalty and allowing them to enroll in ACA-compliant coverage if they lost their short-term coverage. This might well not be possible since the ACA explicitly recognizes short-term coverage as not ACA compliant. Doing this would even further undermine the ACA-compliant market.

Health Reimbursement Arrangements

Finally, the Executive Order directs the agencies to reduce restrictions on the use of Health Reimbursement Arrangements (HRAs). This could allow more generous funding of HRAs. But its primary intent seems to be to allow the use of HRAs to pay for premiums in the individual market.

An HRA allows employers to fund medical care expenses for their employees on a pre-tax basis. HRAs were not prior to 2016 formally recognized in the Tax Code, but were rather created by IRS guidance. They qualify for pre-tax treatment only because they are considered group health plans, and thus not subject to tax under the group health plan exception under the Tax Code.

An HRA must be funded solely by employer contributions and can only be used to reimburse an employee for the medical care expenses (as defined by the IRS) of the employee or dependents up to a maximum dollar amount. Any unused portion of the maximum dollar amount may be carried forward to subsequent years. If certain rules are followed, neither employer contributions to nor employee reimbursements from a HRA are subject to income tax.

HRAs are not explicitly mentioned in the ACA. However, the IRS, in collaboration with the Departments of Labor and HHS, concluded that, as a form of group health plan with tax-exempt employer contributions, HRAs must comply with ACA group health plan requirements, including the ACA’s preventive services coverage mandate and prohibition on annual limits. Thus, an employer cannot use a HRA simply to pay premiums for coverage of employees and their dependents in the individual market. HRA contributions can only be sheltered from taxation if they are coupled with an ACA-compliant group health plan. This was the position that the Departments took in a series of guidances beginning in 2013, subject to limited exceptions.

A Small-Employer Exception From HRA Limits In The Cures Act, But A Strictly Limited Exception

In 2016, Congress adopted in Title XVIII of the [21st Century] Cures Act a new type of arrangement, the Qualified Small Employer HRA (QSEHRA), that is effectively an exception to the HRA prohibition, but only for small employers — employers that have fewer than 50 full-time equivalent employees and therefore are not subject to the large employer mandates. These employers may pay or reimburse employees through a QSEHRA for premiums for health insurance that qualify as minimum essential coverage.

The Cures Act exception, however, is tightly circumscribed. A QSEHRA must be solely funded by the employer without employee contributions, the payments cannot exceed $4,950 per year ($10,000 for family coverage), and contributions must be provided on the same terms to all eligible employees (although payments may vary insofar as premiums vary based on age or the number of family members). Employees may be excluded as ineligible if they are under age 25, employed for fewer than 90 days, part-time or seasonal employees, subject to a collective bargaining agreement that covers health benefits, or certain non-resident aliens. QSEHRAs meeting these requirements are defined to not be group health plans but will still benefit from the group health plan tax exemption.

Individuals who receive QSEHRA contributions are not eligible for premium tax credits if the monthly premium for self-only coverage for the benchmark second-lowest cost silver (70 percent actuarial value) plan in their “relevant individual insurance market” falls below a threshold: one half of 9.5 percent of the employee’s household income minus the QSEHRA premium contribution. If coverage is not affordable under this formula—if the benchmark premium exceeds the threshold—the employee may qualify for a premium tax credit, but it will be reduced by the amount of the QSEHRA contribution.

Employers must provide their eligible employees notice at least 90 days before the beginning of a year for which they offer a QSEHRA 1) that it is available and 2) that employees must have minimum essential coverage to receive QSEHRA premium contributions tax free. The employer must state in the notice that employees should inform the marketplace of the availability of the funding if they apply for marketplace coverage. Employers are also required to report the amount of the benefit on their employees’ W-2s. Most of the provisions of the law become effective as of any plan years following the end of 2016.

Expanding the use of HRAs to pay for individual premiums of course, raises concerns for market segmentation. If employers can dump their unhealthy employees into the marketplaces, they will surely degrade the marketplace risk pool. In adopting the CURES Act, Congress essentially accepted the Departments’ interpretation of the how HRAs should be treated under the ACA and created a limited exception. It is difficult to see how the administration can unilaterally expand the limited exception Congress created without legislative authority, particularly without the guardrails Congress thought necessary.

Achieving Through Regulation What Couldn’t Be Done In Congress

President Trump’s executive order appears to be part of a larger strategy of undermining the ACA. Other decisions of the Trump administration—creating uncertainty as to funding of the cost-sharing reduction payments, reducing advertising and navigator funding for marketplace enrollment, cutting the length of the open enrollment period, closing the marketplace for maintenance for hours each week—seem intended to drive down marketplace enrollment and drive up ACA-compliant coverage premiums. This strategy seems to have been quite effective—premiums are up dramatically for 2018 for individuals who do not have the benefit of premium tax credits.

The second step in the strategy is to open doors for young and healthy people to flee that ACA-compliant market and find lower premiums. All three of these measures do this. Their apparent intent is to siphon healthy people out of the ACA-compliant market, causing the risk pool to become every less healthy and more costly, possibly leading to collapse in some states. These measures could also leave a significant number of participants in the small group and individual market without the protections Congress intended to give consumers when it adopted the ACA. If the changes go into effect for 2018, markets could destabilize immediately, with some insurers exiting the individual or small group markets.

All summer some Republicans in Congress attempted unsuccessfully to repeal the ACA. The rules that will follow from the executive order may to a substantial degree achieve the goal Congress refused to accept.

Article source:Health Affairs

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