On Thursday, October 12, President Trump signed the Presidential Executive Order Promoting Healthcare Choice and Competition directing the Secretaries of Treasury, Labor and Health and Human Services to consider regulations that would expand association health plans, increase the availability of short term health insurance plans and allow the use of Health Reimbursement Arrangements (HRAs) for the payment of individual health insurance premiums. Additionally, the President indicated he would stop paying the Cost Sharing Reductions (CSRs) for low income Exchange enrollees.
Q. When are these new rules effective?
A. The executive order directs the various agencies to issue new regulations. It is likely the proposed regulations will be published in December and February, followed by a 30 day comment period and then another month to compile the questions before the final regulations are published. Given the push to improve the health insurance market as quickly as possible, the regulations regarding association health plans and short term policies will be likely effective when the final regulations are published and the regulations regarding the uses of the HRA and potential changes to increase the length of time could be effective retroactively to January 1, 2018. However, it is difficult to tell when the rules will be effective until the regulations are published.
Q. Will I be able to purchase health insurance in another state?
A. Section 1333 of the Affordable Care Act (42 USC § 18053) already allows the purchase of insurance plans in other states, if there is an agreement between the states where the insurer and insured are located. Without a significant effort between states, it is unlikely that you will be able to purchase a plan offered in another state. However, employers may have expanded opportunities to band together and form self-funded arrangements that can span across multiple states. It is important to note, however, that premiums, while driven somewhat by competition, are highly regulated and are driven more by the cost of care where you live. Even if you can purchase health coverage from another state, the cost will likely be similar to other plans that cover individuals in your region.
Q. What does this mean to the business owner?
A. You may have additional healthcare options beginning as early as the spring of 2018. However, it will take some time for state officials and insurers to react to the new rules. Therefore, products may not be available for a few months (or more) after the regulations are published. Please note that if you choose to purchase lower cost coverage for your employees, that coverage will likely have benefits that are not covered or may have much higher cost sharing (deductibles and out-of-pocket maximums). You insurance broker should be able to assist you in choosing a plan that is right for you.
Q. What does this mean to an employee?
A. Coverage for employees depends on the types of health coverage purchased by your employer. It could mean that nothing changes. If your employer decides to change plans, then you will need to change plans. Please be sure to review all your options during your plan’s open enrollment period.
Q. What does this mean to an individual under age 65 purchasing health insurance directly from an insurer?
A. You may have the option to purchase a short term policy with a policy period lasting as long as 6 months. While the executive order directs the agencies to extend the period for short policies to under 12 months, since 1997, Nevada has had a regulation limiting short term policies to no more than 6 months. Note that short term coverage is not considered minimum essential coverage and, absent a change to the rules, you may have to pay a tax penalty if you are not covered under minimum essential coverage. Please note that while a short term policy can usually be purchased for lower cost, these policies normally cover significantly fewer items than minimum essential coverage.
Q. What does this mean to an individual purchasing coverage on Healthcare.gov?
A. Nothing. The Nevada Division of Insurance and exchange insurers have already taken steps to ensure the appropriate plans are available on the exchange, even if the Federal Government takes away funding to help lower income individuals.
Q. What does this mean to an individual who is eligible for Medicare?
A. Nothing. This executive order does not alter Medicare coverage.
Q. Will I be able to purchase an association plan?
A. No, you will not be able to purchase an association plan as they are currently understood. Association Health Plans were essentially eliminated under the Affordable Care Act because the restriction on varying rates (Public Health Service Act § 2701; 42 USC § 300gg) and the guaranteed issue provisions (Public Health Service Act § 2702; 42 USC § 300gg-1) eliminate the ability to provide discounts to a select group of individuals. It will likely prove difficult to create a regulation that goes around these two statutory provisions.
Q. Are there other types of plans that are similar to association plans?
A. Sort of. There are plans called Multi Employer Welfare Arrangements (MEWAs). It is possible that the administration could choose to loosen the approval processes for MEWAs and trusts that are regulated by the Department of Labor through self-funded health plan rules. While this isn’t technically insurance, the Administration could claim victory for allowing individuals to enroll in lower cost multi-state self-funded plans. It is important to note that these plans will likely be less costly because they cover fewer benefits. Additionally, the employers/trusts are responsible for the financial health of the fund and would have to cover any catastrophic expenses of its members.
Q. Can I purchase short term policies now?
A. Yes, if they are available through other insurers. Currently, they are limited to three month policy periods. It is important to note that the three month limit is currently in sync with the three month coverage gap exception to the individual mandate penalty (26 CFR § 1.5000A-3(j)(2)(i)). However, this regulation is in contradiction to the plain language of 26 IRC § 5000A(b)(1), which limits the coverage gap to 1 month. Therefore, it is possible that the IRS uses the same regulatory authority to increase the exception to the individual mandate penalty to greater than 3 months.
Q. Can’t I already use my employer’s HRAs to pay individual premiums?
A. Yes. IRS Notice 2013-54 frustrated many employers by preventing them from using HRAs to fund individual premiums. Section 18001 of the 21st Century Cures Act overturned that regulation for small employers. The executive order proposes to expand the use of HRAs to the extent permitted by law. It is unclear how the executive order will improve upon the 21st Century Cures Act. It may be expanded to include large employers, the funding limits may be increased, or they may allow the use of the HRAs to purchase short term policies.