The Executive Order
The Executive Order signed by President Trump yesterday focused on small businesses (fewer than 50 employees) that get coverage in the small group insured market and on individuals without access to employer-sponsored plans who buy coverage on their own, with no government subsidy. There were three directives in the Executive Order:
- Enable Association Health Plans (AHPs) to let small employers band together to buy insured or self-funded health plans across geographies.
- Expand the period that short-term limited duration insurance (STLDI) may be in force; current regulation limits these plans to periods of fewer than 3 months (previously was one year).
- Consider allowing Health Reimbursement Arrangements (HRAs) be used to buy individual coverage with tax-free money; currently only employers with fewer than 50 employees can offer them for this purpose.
The executive order does not change anything immediately. It directs Health and Human Services, Labor and Treasury Departments to draft rules intended to lower health insurance costs by easing some current ACA requirements. Many of the EO’s policy details and implications won’t be clear until the agencies issue final regulations. The three Departments will proceed under the typical rulemaking process, which includes publishing draft rules and allowing for public comment, so changes aren’t expected to occur for at least several months. Why so long? The rulemaking process. "This is only an executive order," said Tim Jost in a Politico article. "It is not a change in the law or even in regulations. It is a direction to draft rules." Those rules also may face legal challenges, according to health care lawyers, depending on how they're drafted and what existing laws they seek to change.
No more Cost-Sharing Reduction (CSR) Payments
On the heels of the EO, The White House also announced that cost-sharing reduction payments (CSRs) will end. In 2017, approximately 7 million exchange enrollees (60% of all exchange enrollees) receive CSRs, through payments to insurers, for total of $7B. As a reminder, under the ACA, eligible individuals with household incomes between 100% and 400% of the federal poverty level (FPL) qualify for premium tax credits to offset the cost of individual coverage on the public exchanges. Lower-income eligible individuals — those earning up to 250% of FPL — purchasing silver plans also can qualify for lower out-of-pocket limits and reduced copays, coinsurance, and deductibles. While insurers must reduce these out-of-pocket costs for qualifying individuals, the ACA specifies that the federal government will reimburse carriers for these expenses. However, the Administration maintains that because Congress did not specifically appropriate money for this purpose, CSR payments are illegal.
Because the uncertainty of whether the CSR payments would continue, most insurers built the CSR cost into their 2018 public exchange premiums for the silver plans. It remains to be seen whether the administration’s announcement will cause insurers to exit the market. Some states say they will bring a motion to continue the payments while current legal action on this issue proceeds, and other lawsuits are possible. Bipartisan negotiations to fund the CSRs will continue but face many hurdles.
Employers care about this issue because a stable individual market not only is a source of coverage for benefit-ineligible employees, former employees, and early retirees, but also reduces cost-shifting for uncompensated care to private payers.
In the meantime, employers should continue to focus on:
- ACA compliance – reporting, new preventive services and other design mandates, revised SBC template
- 40% excise tax – effective in 2020
- Cost management – with specific focus on pharmacy cost and consideration of stop-loss, even for larger self-funded clients
This latest attempt at reforming health reform is more evidence that employers can’t wait on the government to help manage health care costs. We’ve said it before and we will, undoubtedly, have to say it again.