On Thursday, President Donald Trump signed an executive order directing federal agencies to reinterpret ERISA to expand the availability of association health plans (AHPs), short-term limited duration insurance (STLDI) policies and Health Reimbursement Arrangements (HRAs). The order specifically directs the of Departments of Labor, Treasury and Health and Human Services to consider proposing regulations or revising guidance as a means to improve access, increase choices and lower costs for healthcare. The order does not immediately trigger any of these provisions but establishes a specific timetable for the federal agencies to report to the president on the feasibility of enacting such provisions. NAHU will work with these agencies to influence the regulations and ensure that any rules that are promulgated are in the best interest of consumers and not in a manner that may destabilize markets.
NAHU will focus its attention on ensuring that consumers remain protected with the implementation of the forthcoming regulations. We have long expressed concerns about expanding the availability of AHPs for selling insurance across state lines for a variety of reasons, including inadequate state oversight, the increased potential for plans with inadequate benefits or financial backing, and the overall potential to destabilize the market. We will work closely with federal and state policymakers to ensure that there is adequate oversight of any newly established health plan entities so that consumers will not face situations where plans have insufficient or unstable financial backing, leaving them with claims that cannot be paid. Additionally, the establishment of associations for the exclusive purpose of offering insurance should be constrained, as these could result in issues of adverse selection.
While we support the overall objective of increasing consumer choice, we do not believe that these changes will necessarily address health plan affordability. The vast majority of cost associated with health insurance is from medical claims paid, which means that, regardless of where a person’s policy might be domiciled, most of the cost would be locally generated. In some states that are heavily regulated, a small savings might be possible due to savings in administrative cost, but overall cost savings would be negligible. Further, this could lead to an unlevel playing field as well as a race to the bottom as states eliminate consumer protections to attract carrier participation, which would lower the overall value of insurance.
The executive order effectively establishes a proposal that has long been championed by Republicans to permit the sale of health insurance across state lines through Association Health Plans. This proposal had been incorporated into many of the ACA repeal/replace reconciliation drafts this year. It had also been passed as a standalone measure earlier this year when the House of Representatives voted 236-175 to pass H.R. 1101 to permit small businesses to form health plans that could be sold across state lines. Under that legislation, plans could either be self-insured or fully insured and the plans would be able to negotiate with providers. The Senate has yet to take action on the bill, where it is currently awaiting consideration by the HELP Committee.
The executive order is the president’s first major executive action on healthcare since the order issued on his first day in office directing federal agencies to ease the regulatory burden of the ACA. Since then, the Centers for Medicare and Medicaid Services, Department of Labor and Treasury Department have issued requests for information to carry out this order, to which NAHU responded with detailed comments.
What Is in the EO?
The EO directs the secretary of Labor to consider proposing regulations or revising guidance to expand Association Health Plans. The intent of this directive is to allow employers in the same line of business anywhere in the country to join together to offer healthcare coverage to their employees. It could potentially allow employers to form AHPs through existing organizations, or create new ones for the express purpose of offering group insurance. This could lead to the sale of insurance across state lines through AHPs; however, more action will need to be taken by the Department of Labor before this option can be available, and NAHU has urged the Administration to work closely with state insurance commissioners across the country to ensure that the rules that are enacted to allow such plans are able to address concerns by state policymakers regarding AHPs crossing into the markets within their borders.
The EO directs the secretaries of HHS, Treasury and Labor to consider proposing regulations or revising guidance to expand short-term limited duration insurance. This directive would allow the agencies to revisit the rule enacted by the Obama Administration that limited the length of STLDI plans to three months. NAHU submitted comments opposing this rule when it was proposed, and we encourage the agencies to work together to extend the length of these plans beyond three months.
The EO also directs the secretaries of HHS, Treasury and Labor to consider proposing regulations or revising guidance to expand Health Reimbursement Arrangements. The intent of this directive is to allow employers to contribute more to their employees' HRAs. HRAs are employer-funded accounts that reimburse employees for healthcare expenses, including deductibles and copayments. The IRS does not count funds contributed to an HRA as taxable income. The intent of this directive is to expand HRAs, which could provide employees with more flexibility in how their healthcare is financed.
What Happens Next?
The EO directs the secretary of Labor to act within 60 days to consider proposing regulations or revising guidance on AHPs. It also directs the secretaries of Treasury, Labor and HHS to act within 60 days to consider proposing regulations or revising guidance on STLDIs, and for the agencies to act within 120 days to consider changes to HRAs.
Within 180 days, the secretary of HHS, in consultation with the secretaries of Treasury, Labor and the Federal Trade Commission, must report to the president on state and federal laws, regulations and policies that limit healthcare competition and choice, as well as on actions that federal and state governments could take to increase competition and choice and reduce consolidation in healthcare markets.
The EO does not direct the agencies to adopt specific regulations; therefore, in order for any policies to change, the agencies will have to go through the traditional rulemaking procedures of providing a proposed rule for public comment before being able to enact any final rules. NAHU will be active in the rulemaking process by reaching out to policymakers as they draft any regulations that result from the EO, as well as submitting public comments to any proposed rulemaking.
What about Open Enrollment for 2018?
At this time, nothing in the EO will affect open enrollment for 2018 unless regulatory action is taken by the agencies. Until any such regulations are enacted, the ACA and all of its regulations, penalties and enforcement remains the law of the land.