Employee Benefits Compliance, Cost-Sharing (Reductions)

Executive Order and Other White House Announcement on Health Insurance

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President Trump signed an Executive Order on October 12, 2017, “Promoting Healthcare Choice and Competition Across the United States.” See summary below.

Also on October 12th the White House and the HHS/CMS issued separate announcements that the federal government will no longer make cost-sharing reduction (CSR) payments to insurance companies, effective immediately.

It’s not clear what the immediate effects will be of the Order and the Announcement. The Order sets the tone and direction the Trump Administration intends to take, an immediate effect.  It gives the regulatory agencies up to 60 days to issue or revise existing guidance, but they could potentially issue it much sooner.  Proposed regulations require a Notice and Comment period before they can be finalized, but other guidance could possibly take effect immediately.   Additionally, it’s not clear whether the Announcement ceasing CSR payments will have immediate effects or more after 2018.  It depends on how insurers react (e.g., raising rates immediately, or pulling out of Exchanges or not) and also on whether some state insurance laws limits insurers’ ability to leave the state Exchanges until 2019.

Executive Order

The Executive Order does not specify exactly what actions will be taken, but instead directs the Secretaries of the Treasury, Labor, and Health and Human Services to “consider proposing regulations or revising guidance, consistent with law, to implement changes in” three specific areas. In the first two areas listed below, guidance should be issued within 60 days (i.e., by December 11, 2017), and in the third area within 120 days (February 9, 2018).

Additionally, the Order is intended to “facilitate the purchase of insurance across State lines.”  No additional detail is provided.

The three areas the Trump Administration will prioritize “for improvement in the near term” are:

  1. Association health plans (AHPs)
    1. Expand access to AHPs by small businesses (and apparently also individuals, it’s not entirely clear from the Order)
    2. If individuals and small groups can be treated as a large group for purposes of buying health insurance, they will escape ACA small group rules such as community rating and essential health benefits (EHBs).
  2. Short-term, limited-duration insurance (STLDI)
    1. Consider allowing such insurance to cover longer periods (Obama administration has limited it to 3 months) and to be renewed by the consumer. STLDI is exempt from ACA mandates.
  3. Health reimbursement arrangements (HRAs)
    1. Increase the usability of HRAs, expand employers’ ability to offer HRAs to their employees, and allow HRAs to be used in conjunction with nongroup coverage.

Click here for a link to the Executive Order.

Announcement Ending CSRs

The two separate October 12th announcements by the White House and Dept. of Health and Human Services (HHS) are worded differently but the message is the same:

  • The Obama administration was appealing a federal district court decision (House v Price) which held that Congress has not legally appropriated money for cost-sharing reduction (CSR) payments to insurers.
  • That court decision had allowed the CSR payments to continue, pending appeal of the case.
  • The Obama administration had continued to reimburse insurance companies for the CSR payments they are required by the Affordable Care Act to make.
  • The Trump administration will discontinue these payments immediately.

CSRs provide dramatic reductions in co-payments, deductibles and out-of-pocket maximums for individuals who enroll in silver plans in the Exchange and have household incomes not exceeding 250% of the federal poverty level. The reductions cost insurers around $7 billion in 2017.

If insurers will not be reimbursed for CSRs by the federal government, they will increase premiums. If premiums increase, so will tax credits for those on the Exchange, but individuals who earn too much to qualify for tax credits will be forced to pay higher premiums or drop coverage.  Some of these individuals might opt for AHPs or STLDI coverage that might become available under the October 12th Executive Order.

Click here for a link to a recent article on CSRs on this site. (9/26/17)

Terminating CSR payments is likely to cause some insurers to stop offering coverage on the Exchanges. According to an excellent article by Professor Timothy Jost in Health Affairs Blog, “Under their contract with the federal exchange, insurers may terminate participation if cost sharing reduction payments are terminated, but they are still subject to state laws on market withdrawal, which limit their ability to do so.” Some states, such as California, instructed insurers to load their on-Exchange silver plan rates to assume the CSR payments would not be made; other states instructed the opposite, however, or gave no instructions.  So it remains to be seen how soon the effect of this Announcement will be felt.