United States: President Takes Key Steps To Reduce Impact Of Affordable Care Act

In an executive order dated October 12, 2017, President Trump outlined a number of items aimed at "promoting healthcare choice and competition across the United States." The publication of the executive order follows a number of failures in Congress to repeal the Patient Protection and Affordable Care Act (ACA). In addition to the executive order, the Trump administration has taken a number of other recent actions that impact certain provisions of the ACA, as described below.

Executive Order

The executive order aims to "facilitate the purchase of insurance across state lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people." The executive order indicates that the Trump administration will prioritize three areas for improvement in the near term:

Association Health Plans (AHPs)

Recognizing that large employers are often able to obtain better terms on their health insurance for their employees than small employers, the executive order identifies expanded access to AHPs as a way to help small businesses overcome this competitive disadvantage by allowing them to group together to self-insure or purchase large group health insurance. Proposed regulations are to be published within 60 days to expand access to health coverage by allowing more employers to form AHPs.

Short-Term, Limited Duration Insurance (STLDI)

By excluding pre-existing conditions and restricting the scope of covered services, STLDI policies generally offer lower premiums. In addition, STLDI policies are exempt from many of the ACA's mandates; however, they are generally limited to three-month coverage periods under the ACA. The executive order identifies STLDI policies as "appealing and affordable alternatives to government-run exchanges for many people without coverage available to them through their workplace." As a result, the Trump administration will increase access to STLDI and calls for proposed regulations to be published within 60 days to expand the availability of STLDI.

Health Reimbursement Arrangements (HRAs)

HRAs are tax-advantaged, account-based arrangements that employers can establish for their employees. The Trump administration will expand the flexibility and use of HRAs, giving employees more options for financing their healthcare. The executive order requires proposed regulations to be published within 120 days 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 non-group coverage.

The executive order also states that the Trump administration will continue to focus on promoting competition in healthcare markets and directs that government rules and guidelines should:

  1. Expand the availability of and access to alternatives to ACA insurance, including AHPs, STLDI and HRAs.
  2. Encourage competition into healthcare markets by lowering barriers to entry, limiting consolidation and preventing abuses of market power.
  3. Improve access to and the quality of information that Americans need to make informed healthcare decisions.

Other Developments

Contraceptive Coverage Mandate

On October 6, 2017, the Treasury, Labor, and Health and Human Services departments and the Internal Revenue Service issued joint interim regulations expanding exemptions to protect religious beliefs and moral convictions for certain entities and individuals whose health plans are subject to a mandate of contraceptive coverage under the ACA. Previously, a limited class of employers that objected to providing contraceptive services based on "sincerely held religious beliefs" were exempt from the mandate. Under the new rules, an eligible employer may claim the exemption based on sincerely held religious beliefs or sincerely held moral convictions. The new rules do not define what constitutes such a sincerely held religious belief or moral conviction, but instead states that the question turns on whether an employer has adopted and documented these beliefs or convictions in accordance with state law.

The religious-based exemption is available to virtually all non-governmental plan sponsors (including for-profit entities and nonprofit entities), while the morally conscious-based exemption is available only to nonprofit organizations and non-publicly traded for-profit entities.

Employers that claim an exemption under the new rules may—but are no longer required to—shift the responsibility of providing contraceptive services to their plans' insurers or third party administration. Exempt employers currently providing this accommodation (as mandated by the Obama administration's guidance) may revoke it. Exempt employers also no longer have to file notice of exempt status with the federal government.

Individuals participating in a group health plan may also receive an exemption. Plan sponsors with no objection to providing contraceptive services may—but are not required to—offer a separate benefit package option that excludes contraceptive services to an individual objecting to coverage or payment of contraceptive services based on a sincerely held religious belief or moral conviction. Employers agreeing to provide this exemption would essentially be providing two different sets of covered services to their employees.

ACA Subsidies

On October 13, 2017, the Trump administration announced that it will no longer pay subsidies under the ACA to health insurers that assist lower-income Americans afford coverage. The decision to halt payments for cost-sharing reductions has previously been mentioned by President Trump as a way to destabilize the ACA marketplace, as ending the payments is grounds for any insurer to back out of its federal contract to sell health plans for 2018.

With open enrollment in the ACA marketplace set to begin on November 1, 2017, the impact of the decision to end the subsidy payments remains to be seen. The Congressional Budget Office previously stated that healthcare premiums would spike in the short term, as insurers would leave the market. However, insurers based 2018 premium rates on the assumption that the subsidies would be eliminated, so the impact of the decision may be minimized.

The attorneys general for multiple states have either stated that they are considering filing for injunctive relief or will file for injunctive relief to require the federal government to continue to pay the ACA subsidies.

Duane Morris Employee Benefits and Executive Compensation attorneys will continue to monitor these developments and assist employers through the changing healthcare landscape.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employee Benefits and Executive Compensation Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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