Executive Branch Takes Action on the ACA (Benefit Minute)
In the last week, the Trump administration has taken action to make changes to certain aspects of the Affordable Care Act (ACA). This action includes two new interim final regulations that scale back the ACA’s contraceptive coverage mandate, an Executive Order related to association health plans (AHP), health reimbursement arrangements (HRA) and short-term limited-duration insurance, and an announcement from the Centers for Medicare and Medicaid Services (CMS) that government payments to insurers for cost-sharing reductions will cease immediately. The recent flurry of activity appears to be the administration’s response to the failure of repeal and replace legislation to move through Congress.
New Executive Order
On October 12, President Trump issued an Executive Order directing the Departments of Labor, Health& Human Services and Treasury to consider proposing or revising guidance with the stated goal of facilitating purchase of health insurance across state lines and developing a health care system that provides high quality care at affordable prices. The Executive Order itself does not bring about any immediate changes to the insurance market but directs the agencies to consider revising or proposing regulations on the following topics:
- expanding access to AHPs and allowing small employers to band together to form AHPs, (perhaps including self-insured AHPs offered across state lines)
- expanding availability of short-term limited-duration insurance and allowing such insurance to cover longer periods of time (currently limited to 3 months)
- expanding the availability and usage of HRAs, including broadening expenses which may qualify for reimbursement under a HRA, increasing employers’ ability to offer HRAs and allowing HRAs to be used in conjunction with non-group coverage
The ultimate impact on employers and individuals will not be known until the agencies provide further guidance. There is also the potential for legal challenges by the states if they determine regulatory action taken by the agencies undermines their ability to regulate insurance in their states.
Cost-sharing Reduction Payments
Also on October 12, CMS announced that ACA cost-sharing reduction payments to insurers would cease immediately, based on a Department of Justice determination that funding for the payments has not been appropriated by Congress. However, even without federal reimbursement, insurers are still responsible for providing the cost-sharing reductions to low income individual enrollees under the ACA, which is likely to result in a large increase in premiums for Marketplace plans and further erosion of the Marketplace.
It is likely that the federal government will no longer pursue the pending appeal over the payments (the lower court found the payments to be illegal). However, this will not be the end of the litigation since an appellate court order permitted several states to intervene in the case, which means the federal government is unable to dismiss the appeal unilaterally. States have already filed legal challenges against the administration for ending the payments, so this unresolved issue is likely to continue unless Congress appropriates funds for the payments.
New Regulations: Contraceptive Coverage Mandate
On October 6, the Departments of Health and Human Services, Treasury and Labor released two interim final rules which allow employers and insurers to decline to pay for contraceptives under the preventive services mandate of the ACA based on a religious or moral objection. These rules are part of these Departments’ response to President Trump’s prior Executive Order Promoting Free Speech and Religious Liberty.
The first interim final rule expands an existing exemption and is now available to most non-governmental employers (whether for-profit or non-profit, whether privately held or publicly traded) who hold a sincere religious objection to providing all or a subset of contraceptives. The second interim final rule makes the contraceptive mandate exemption available to non-governmental employers who object to the provision of contraceptives on the basis of a sincerely held moral conviction, even if there is no underlying religious belief. This second exemption is not available to publicly traded companies, but the agencies did request comments on whether it should be. The exemptions are not available to employers who offer non-grandfathered fully insured health plans in states that mandate contraceptive coverage.
The federal government will not challenge an employer’s assertion of a religious objection to providing contraceptive coverage, but is asking for comments as to whether this should be documented to protect the employer. The federal government will defer to state law with respect to corporate decision-making in determining whether an employer has a sincerely held moral objection.
The interim final rules maintain the existing accommodation process by which a third party (insurer or TPA) handles administration of contraceptive coverage at no cost to the employer and without the employer’s involvement, but this process is now optional for the employer. A non-profit religious organization currently using the accommodation may revoke it and operate under an exemption instead. Such change will generally be effective at the beginning of the next plan year as long as 30 days advance notice is provided to the insurer or TPA.
Neither rule requires an entity claiming the exemption to provide any form of notice or self-certification to the government. However, ERISA group health plans which currently provide contraception coverage but want to claim an exemption and remove it would be required to make updates to relevant plan materials and provide notice to their employees that such coverage would no longer be available through the plan.
Several states and activist group have already filed suits against the federal government on various grounds over the issuance of these regulations. Other organizations and states have also come out in opposition to the rules, so it is likely additional lawsuits will follow. There is also the potential that individuals who lose access to free contraceptive coverage from their group health plans will file suit against their employers on the basis of sex discrimination.
While these interim final regulations are effective immediately, it is possible that there may be revisions after comments are received and reviewed. Employers considering reliance on the religious or moral exemption to cease covering contraceptives should exercise caution and make a full assessment of the potential impact of a change before altering their benefit plans in reliance on these regulations.