Executive Order Directs Agencies to Consider Expanding HRAs and Alternatives to the Public Health Insurance Marketplace
On October 12, 2017, President Trump issued an Executive Order directing the U.S. Departments of Health and Human Services, Labor, and the Treasury to “consider proposing regulations or revising [existing] guidance” for health reimbursement arrangements (“HRAs”), association health plans (“AHPs”), and short-term coverage related to loosening existing requirements under the Affordable Care Act (“ACA”). While the Executive Order does not literally order the agencies to issue regulations or change existing guidance, it is likely that the agencies will do so. This process should take months, and thus the Executive Order is a signal of change rather than change itself. There are few details at this time, but a high-level summary including open issues is below:
- HRAs – The clear intent is to enable employers to offer HRAs to current employees that can be used to purchase insurance policies from the individual insurance market. This could be accomplished by either permitting HRAs to integrate with individual insurance coverage for the purposes of ACA compliance – a reversal of current guidance – and/or exempting such HRAs from having to comply with the ACA’s plan design requirements (g., the prohibitions on annual and lifetime limits for “essential health benefits”). Small employers gained the ability to offer the somewhat similar Qualified Small Employer Health Reimbursement Arrangement (“QSEHRA”) as of January 1, 2017. Under the QSEHRA rules, a small employer cannot offer both a QSEHRA and group health plan coverage (please see our earlier discussion of the QSEHRA regulations here). Unlike the QSEHRA for small employers, it seems probable that large employers will be able to continue to offer other group health plan coverage in addition to an HRA that can be used to pay for individual insurance coverage. It is also probable that an employer will have the option to choose whether its HRA can be used to pay for individual insurance coverage or exclude this by design. Finally, it’s not clear if a large employer that solely offers a premium reimbursement HRA will be treated as having made an offer of coverage for the purpose of the ACA’s employer mandate.
- AHPs – The Executive Order asks the DOL to consider ways to make it easier to form an AHP by loosening the existing membership rules under ERISA. The intent is to enable employers that would otherwise have to separately purchase small group insurance subject to a large number of ACA mandates and state insurance laws to participate in a self-insured ERISA plan subject to fewer ACA mandates and state regulations. However, these AHPs would still be considered “multiple employer welfare arrangements” (“MEWAs”) subject to state regulation under ERISA, which limits the ability to offer an AHP across state lines. It seems likely the administration intends the DOL to circumvent this restriction, such as by limiting state authority to regulate self-insured MEWAs and/or promoting the formation of insurance compacts between states whereby a state would view an AHP as complying with its laws if the AHP complies with state requirements where the AHP is sitused. ERISA protection also requires the coverage be offered by employers to their employees, thus it appears that AHP membership could not be expanded to include self-employed individuals.
- Short-term coverage – Under existing law, certain short-term health coverage is not subject to the ACA. Coverage under a non-ACA compliant short-term health plan does not cause an individual to fail the ACA’s individual mandate requirement as long as the individual is covered by the policy for less than three months. The Executive Order requests the agencies to explore expanding the permitted short-term coverage period to less than twelve months. View the Executive Order.