On October 12, President Trump signed Executive Order 13813, asking the Department of Labor (DOL) to consider allowing small employers to join together to self-insure or purchase insurance as a large group (creating "Association Health Plans"); asking the IRS, DOL, and HHS to expand the usability of Health Reimbursement Arrangements (HRAs); and asking to expand the use of short-term limited duration insurance (the latter of which is not the focus of this blog). On that same date, the IRS updated its website, adding a statement that individual tax returns filed in 2018 (for the 2017 tax year) will be considered incomplete if information about individual and family medical coverages is not provided.
Possible Effectiveness. Frustrated with Congress' inability to pass legislation, the President continues to ask regulatory agencies to enforce, or disregard, the laws with certain goals in mind. Generally, the agencies take the position that their job is to enforce the laws as written, and, as such, they cannot unilaterally decide not to enforce any law. That was the point of the IRS statement, and it has made similar statements about the continued applicability of Affordable Care Act (ACA) requirements and penalties. Still, while most regulations "interpret" the law, many seem to expand on it, and perhaps the agencies have more leeway with those.
Association Health Plans. Allowing small groups to combine to self-insure or get better commercial rates could cause logistical problems if the only groups that combine are small companies with heavy medical users. From a legal perspective, there are numerous issues. First, ERISA does not preempt state laws governing multiple employer health plans. This may make it difficult for small groups in different states to combine. Second, to prevent fraud, many states heavily regulate self-insured plans for such combined groups. Historically, problems have arisen when salespeople promote these plans, receive premiums from many "mom and pop" businesses, and disappear with the cash. In fact, when the DOL issued guidance on multiple employer health plans in 2000, it commented that it was investigating potential fraudulent schemes that it believed affected over 1.2 million people and involved over $83.6 million in unpaid claims. Any business that is considering joining such an organization must make sure the organization is properly-registered in its state. Third, if Association Health Plans (AHPs) are self-insured, meaning the individual small businesses are liable for claims, issues may arise when one of the small companies goes out of business. Will the remaining members be responsible for that former company's employee claims? For fully-insured arrangements, what happens if a struggling business fails to pay premiums? Do the remaining members become liable? In the retirement plan arena, some employers use "pooled" accounts, in which their company's contributions are pooled with those of other companies, and similar issues can arise in this situation. These examples show why it is critical to carefully review agreements, in general, and agreements in which multiple entities are combining for a joint purpose, particularly.
Health Reimbursement Arrangements. HRAs are generally used to allow employees to receive up to a set dollar amount (e.g., $8,000) for medical expenses. HRAs have enabled companies to help their employees with medical expenses while limiting their own liabilities. This limited liability makes HRAs attractive, especially to smaller companies that do not offer standard medical insurance. These companies use HRAs to help their employees afford medical insurance premiums that they purchased outside the company. In the past, the agencies have found HRAs are group medical plans under the ACA. This makes them subject to ACA restrictions, including the restriction on lifetime and annual limits that HRAs cannot satisfy because of their relatively low benefit ceilings unless they are combined with a more standard medical insurance that satisfies ACA requirements. If the agencies decide that HRAs are group health plans based on regulations, and not on law, then they may be able to accomplish the President's goals. Even before ACA, however, HRAs were viewed as health plans. This is why COBRA applies to HRA benefits. So, if the agencies' positions on this change, they will need to assess whether their position on HRAs are changing as to the ACA only, or as to all health care laws.
Final Comments. Regardless of whether developments relate to a law like the Affordable Care Act, a regulatory action like the Fiduciary Rule, or an executive order, there will always be unintended consequences . As new opportunities to provide health care or reduce costs arise, it is important to communicate with your advisors to better understand how new opportunities might affect your entity initially and on an ongoing basis.
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