President Trump issued an Executive Order yesterday which purports to suggest three avenues for offering health insurance at a decreased cost to small employers and consumers for the overall goal of reducing healthcare costs on the grounds that the Affordable Care Act (ACA) has limited consumer choice resulting in an increase in healthcare insurance cost. The Order charges various administrative agencies to act within 60 days.
First, the Executive Order directs the Department of Labor (DOL) to issue proposed rules that would permit small employers to join together and create what can be likened to multi-employer plans for the purpose of obtaining the same discounts for insurance offered to large employers, interestingly one of the two premises behind creation of the ACA Exchanges, by expanding access to Association Health Plans. The proposed plan of action would rely on a “broader interpretation” of a provision of the Employee Retirement Income Security Act (ERISA) that permits multi-employer plans for employers who have a “commonality of interest.” ERISA is statutory law modifiable only by Congress although the Employee Benefits Security Administration (EBSA), a division of the DOL, is charged with enforcing ERISA as they pertain to employer’s healthcare plans.
The Executive Order directs the DOL, Department of Treasury and Department of Health and Human Services (HHS) to issue rules that permit healthcare coverage to be offered through short-term limited duration insurance which is not subject to the ACA by extending the allowable coverage under these types of plans for longer periods and permitting consumers to renew them. The Executive Order also directed the agencies to issue regulations applicable to Health Reimbursement Accounts (HRA) that increased the usability beyond what HRAs already offer.
One concern is the less costly healthcare insurance offered under AHPs or short-term limited duration insurance plans may not contain all of the coverage protections required by the ACA. As a reminder, the ACA requires that all healthcare plans offer coverage for essential health benefits and that the insurance plan provides minimum value (namely covering the cost of covered treatments up to a certain percentage of the total cost). Another concern regarding the proposals are that the changes would result in violations of other federal laws which prohibit disparity in premiums between younger, healthier workers or individuals as compared to premiums charged to those who are older or sicker.
The Executive Order identifies a number of statistics about healthcare insurance costs and coverage all to show that health insurance is becoming less affordable for consumers and too costly for carriers to offer resulting in a decrease of competitive healthcare insurance plans and an increase of uninsured.
President Trump also criticizes the consolidation of providers as a reason healthcare costs have increased, suggesting that the consolidations interfere with healthy competition, and requiring the Federal Trade Commission, along with DOL, HHS and Treasury, to report to him within 180 days on federal and state policies limiting competition and choice in the healthcare industry.
Similar to his January 31, 2017 Executive Order in which he asked enforcement agencies to soften penalties under the ACA where the law allowed, any agency attempting to comply with the admonishment cannot simply and quickly issue new rules that then become enforceable regulations. Finally, as a practical matter, because it is October, most calendar plan years are already engaged in the open enrollment process so the earliest any enforcement changes could be implemented for those plans would be 2019. The Executive Order can be found here.
In the meantime, employers should continue to abide by the ACA. The IRS anticipates issuing its first penalty letters to employers for noncompliance this December.