Employers sponsoring self-funded group health care plans are likely familiar with the Patient-Centered Outcomes Research Fees which will be imposed beginning in July 2014 as a result of the health care reform bill. The fees — $1 per covered life for the first year, and $2 per covered life thereafter — can add up for plans. These fees may be dwarfed, however, by another health care reform fee-the Transitional Reinsurance Fee.
The Transitional Reinsurance Fee, which applies to both insured and self-funded group health plans, has been somewhat of a sleeper in benefits news. Although final regulations were issued March 23, 2012, the annual amount of this per capita fee is still unknown. However, preliminary projections indicate that the annual fee could be at least $60, and perhaps as high as $105, per covered life (covered employees and their dependents), making the Patient-Centered Outcomes Research Fee seem like a pittance.
The Transitional Reinsurance Fee is intended to stabilize premiums for high-risk individual health insurance policy-holders. Reinsurance payments will be distributed to health insurance issuers to offset high costs for covering high-risk populations. The program will operate from 2014 to 2016, with the first quarterly payments due January 15, 2014.
Insurers are responsible for the fees for insured individual and group health plans, whereas “third-party administrators” — not defined in the final regulations — must remit payments on behalf of self-funded group health plans and their sponsors, which will bear the financial responsibility for the Transitional Reinsurance Fee.
HIPAA-excepted stand-alone dental and vision plans, HIPAA-excepted Health FSAs, and Medicare supplemental plans are not subject to the fee. Notably, retiree-only plans that are not HIPAA-excepted plans are subject to the fee.
The final amount of per-capita assessment to be levied in 2014 is expected to be announced this fall. Once announced, that amount may change for 2015 and 2016. Although a moving target, the Transitional Reinsurance Fee should be part of budgeting for health care reform and considered in the decision of whether to “play or pay.”
Now that the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (“PPACA”) has been upheld by the U.S. Supreme Court, employers need to consider whether to “play or pay”. Among the many factors an employer should consider in making its determination are (1) the transitional reinsurance fee (which we will discuss in an upcoming post) and (2) the new annual fee intended to fund clinical effectiveness research.
Employers with fully insured plans should note that even though responsibility for reporting and paying the annual fee rests with the health insurance issuers, such expense will likely be passed along by the issuer to policyholders in the form of increased premiums.
Employers who sponsor one or more of the following health plans on a self-funded basis will be subject to the annual fee based on the average number of covered lives:
- Major medical plans
- Retiree-only plans (even though such plans are not subject to PPACA mandates)
- Health reimbursement arrangements
- Health flexible spending accounts (unless an excepted benefit under HIPAA)
- Dental and vision plans (other than those offering limited scope dental or vision benefits, as determined under HIPAA)
- Employee assistance programs, disease-management programs, or wellness programs that provide significant benefits in the nature of medical care or treatment
A covered plan is considered self-funded if any portion of its coverage is provided through a means other than an insurance policy, including funding through a voluntary employees’ beneficiary association (VEBA).
More details on these exceptions are in our prior post on this topic here.
Annual Fee Amount
With respect to a self-funded covered plan, the plan sponsor must begin paying the fee for plan years ending after September 30, 2012. For calendar-year plans, this means the first payment for the plan year ending December 31, 2012 will be due July 31, 2013 (the fee is generally due by the end of July following the end of the applicable plan year). For the first year, the fee is $1 per covered life, increasing to $2 per covered life for the second year and thereafter indexed based on projected increases in per capita national health expenditures until the fee is phased out in 2019.
Average Covered Lives
Under the proposed regulations, the plan sponsor may calculate the average number of covered lives by using any of the following methods:
- Actual Count: Calculate the sum of the lives covered for each day of the plan year and divide by the number of days in the plan year.
- Snapshot Date: Add the total lives covered on a single date in each quarter (or more than one date, if an equal number of dates are used for each quarter) and divide by the total number of dates on which a count is made. The plan sponsor must use the same date(s) for each quarter. The number of covered lives can be determined by either (i) actually counting the number of lives or (ii) adding the sum of participants with self-only coverage to the number of participants with other than self-only coverage multiplied by 2.35.
- Form 5500: Add the total number of participants covered at the beginning of the plan year with the total number of participants covered at the end of the plan year based on information reported in the Form 5500. If the plan only offers self-only coverage, the sum can be divided by 2.
Special Rule for Multiple Plans: If the plan sponsor maintains multiple self-funded plans within the same plan year, it may treat such plans as a single plan so as to avoid double counting covered lives. However, insured and self-insured plans maintained by the same plan sponsor cannot be aggregated.
Special Rule for Health FSA and HRAs: If the plan sponsor maintains a health reimbursement arrangement or a health flexible spending account that is not an excepted benefit, the plan sponsor may count only each participant as a covered life (the plan sponsor does not have to take into account the participant’s spouse or other dependents).
Plan sponsors must use the same method for the entire plan year but may use different calculation methods from plan year to plan year. However for the initial reporting year, the proposed regulations permit plan sponsors to use any reasonable method to determine the average number of covered lives.
Employers seeking to minimize the amount of the applicable fee should consider whether it is feasible to reduce the number of covered lives by amending the eligibility provisions of the plan.
Although the fee is paid annually, plan sponsors are responsible for reporting the required fees using IRS Form 720, Quarterly Federal Excise Tax Return. In the case of a plan maintained by members of the same controlled group or affiliated service group, each participating employer is responsible for reporting and paying the required fee with respect to its own employees, unless the plan sponsor is designated in the plan documents (or a participating member is designated as the plan sponsor for the purposes of reporting and paying the fees) and such employer has consented to the designation.
On Monday, the Eleventh Circuit Court of Appeals ruled in Seff v. Broward County that Broward County, Florida’s wellness program qualified for the Americans with Disabilities Act (ADA) bona fide benefit plan safe harbor and therefore was not discriminatory under the ADA. This is a helpful ruling for employers maintaining or looking to implement wellness programs.
Background. The ADA generally provides that an employer can only require medical examinations of its employees if they are job-related and consistent with business necessity. However, the ADA also says that it is not intended to prohibit an employer “from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law.”
The Case. In the case, Broward had a wellness program with biometric screening and an online health risk assessment. Employees who were determined to have asthma, hypertension, diabetes, congestive heart failure, or kidney disease were offered the opportunity to participate in a disease management program, which gave them the chance to receive waivers of co-payments for some medications. If an employee chose not to participate in the wellness program at all, he or she was charged $20 on each bi-weekly paycheck.
The issue in the case was whether the wellness program was part of the Broward County’s health plan, within the meaning of the ADA safe harbor. If it did not meet the safe harbor, it could have been ruled to violate the ADA (if another exception did not apply). Broward’s acting benefits manager had testified that the wellness program was not part of the plan. However, the court said it did not read the ADA safe harbor as requiring the wellness program to be part of the same physical document as the plan. The court instead pointed out that the health insurer offered the program as part of its contract to provide insurance, the program was only available to plan enrollees, and that Broward presented the program in at least two employee handouts. These were sufficient for the wellness program to qualify for the safe harbor in the court’s view.
Our Thoughts. This is good news for employers. The ADA’s treatment of wellness programs has been somewhat of a gray area, and this helps provide some clarity. However, employers should not read too much into the case. For example, the case does not speak to a wellness program that is available to employees regardless of their participation in the health plan. It is not clear such a program would qualify for the safe harbor, although it may be permissible under other ADA provisions.
Additionally, while the court does not require that the wellness program be part of the plan document for ADA purposes, wellness programs that provide medical care (like disease management programs) are ERISA welfare plans. As a result, they should either have their own plan document or be part of the health plan’s document. Finally, any wellness program needs to comply with HIPAA’s nondiscrimination requirements.
On May 7, 2012 the DOL issued Field Assistance Bulletin 2012-02, consisting of 38 questions and answers intended to clarify some of the issues raised since the issuance on October 20, 2010 of the final participant fee disclosure regulations (as discussed in our prior post here). Q&A 30 included language that would have required plan administrators to treat a brokerage window or a broad-based platform of funds as a designated investment alternative, subject to the fee disclosure requirements if a “significant number” of participants invested in the same alternative. This position took plan sponsors and practitioners by surprise because it was not consistent with prior interpretations of the regulations. In addition, many commentators noted that the DOL should have announced this position, which was viewed as a significant change, in proposed rules with the opportunity for review and comment, rather than in a Field Assistance Bulletin.
On July 30, 2012, the DOL issued Field Assistance Bulletin 2012-02R, which deleted Q&A 30 and replaced it with Q&A 39. The DOL clarified that a plan is not required to have designated investment alternatives (DIAs); there is no required number of DIAs. An investment alternative is a DIA only if it is specifically designated as such. A plan sponsor can designate no DIAs if it chooses. As a result, fee disclosures are not required for brokerage windows or broad-based platforms unless they are specifically identified as designated investment alternatives.
Although new Q&A 39 provides some relief, the DOL gave plan administrators some cautions. It reiterated its statement in prior Q&A 30 that a failure to designate investment alternatives, for example to avoid fee disclosures, raises questions about compliance with ERISA’s duties of loyalty and prudence. The DOL also stated that it intends to discuss these issues with interested parties to determine how to ensure compliance with fiduciary duties in an efficient and cost effective manner and did not rule out the possibility of proposing amendments to the regulations.
While the Patient Protection and Affordable Care Act is not a carbon copy of the original Massachusetts health care reform law, there are many similarities. One similarity is that critics of both laws have argued at different times that they don’t do enough to “bend the cost curve” on health care.
(As an aside, we always thought the term “health care reform” was a bit of a misnomer for PPACA, as it is really a health insurance reform and tax bill. Interestingly, the President agrees. On the day he signed the law, he said, “today…health insurance reform becomes the law in the United States of America.”)
To address this issue, Massachusetts recently passed Bill S. 2400, which is designed to reign in the cost of health care in the Commonwealth. As you might expect, the bill is a long, complicated piece of legislation (a briefer summary is here). The bottom line goal of the legislation is to control the health care cost growth rate. It is designed to limit the annual increases in the cost of health care in Massachusetts to the increase in the Gross State Product (GSP) of Massachusetts from 2013 to 2017. After that, the increase would be between GSP and GSP – 0.5%.
When the bill was passed, we asked on Twitter whether this could be a model for a “PPACA 2.” If it is, a writer for the Health Policy Forum gives a fairly grim picture (he calls it the “Triangle of Painful Choices”) of what would have to happen from a tax and/or non-health care spending perspective for this to work on a national level. His conclusion (not in so many words) is that a “PPACA 2” designed to achieve the Massachusetts cost increase goals would be an expensive blockbuster sequel (and we have learned from Hollywood that a sequel is almost uniformly received worse than the original).
The key takeaway here is that employers should keep a watchful eye on Massachusetts because this (or something like it) is likely a coming attraction at the national level. While we are not aware that legislation like this is currently being considered, at some point, it seems inevitable that Congress will address the health cost increase issue. Employers would probably welcome such cost control. However, it is not likely to come without additional burdens on employer-sponsored health plans. That is something Massachusetts cannot do directly because of ERISA preemption, so the law does not necessarily provide a blueprint for what those burdens might be.
Related Links (Last Updated Dec. 27, 2012)
Among many other things, the MOVING AHEAD FOR PROGRESS IN THE TWENTY-FIRST CENTURY ACT (“MAP – 21″), which became law last month, changes the minimum funding rules for single-employer defined benefit pension plans. Your actuary can help to determine the effect of these changes on your company in the short and long run.
Background. Since 2001, the IRS has published rates for determining minimum contributions for each month. These rates are based on the prior month’s current short-, medium- and long-term corporate bond yields. Until enactment of MAP-21, a plan could either apply the current month’s full yield curve or use a smoothing technique that blends the rates published over the prior 24 months. In the current low interest rate environment, these rules require very high minimum contributions. This has been mitigated so far by means of short-term patches.
What MAP-21 does. MAP-21 gives longer-term relief by permitting use of rates based on 25-year averaging. There is no change in the plan sponsor’s overall funding obligation, but now the obligation can be spread over a longer time period.
How the new rules work. A plan can still use the IRS’ current yield curve with no averaging. For plans that use the averaged rates, MAP-21 creates a collar for the minimum and maximum rate in each range (short, medium and long), based on a 25-year average of the IRS published rates, as follows:
After 2015 70%-130%
If a 24-month rate is lower than the low end of the 25-year collar for the rate for a year, the rate at the low end of the collar applies, and if a 24-month rate is higher than the high end of the collar for the rate for a year, the rate at the high end of the collar applies. If a 24-month rate falls within the collar, it is not adjusted. The 25-year collar gets wider from 2012 through 2016, and the wider it gets, the more likely that the 24-month rates are to fall within it.
Knock-on effects. The new methodology affects only calculation of minimum contributions and the plan actuary’s annual certification of the plan’s funded status (AFTAP Certification) used to determine whether there are restrictions for a year on lump sum distributions, annuity contract purchases, future benefit accruals and shutdown or other unpredictable contingent event benefits.
The new methodology does not apply to calculation of minimum and maximum lump sum benefits, maximum deductible contributions, calculation of the amount of excess pension assets that can be applied to purchase of retiree health and life insurance benefits, the plan sponsor’s financial reporting obligations or the plan’s PBGC reporting obligation under ERISA section 4010. The new methodology does not apply to calculation of PBGC variable premiums, but it will affect the amount of PBGC variable premiums because lower current contributions result in higher unfunded liabilities and higher PBGC variable premiums, which will be made even higher by increase in the variable premium rate over the next few years under other provisions of MAP-21.
Required participant disclosures. Some underfunded plans will have to include information in their annual participant disclosures for plan years beginning in 2012, 2013 and 2014, comparing the funded status of the plan under the new rules and the prior rules, including a table showing the differences.
Effective dates. These changes are generally effective for plan years beginning in 2012 and later. Plan sponsors have some flexibility with respect to application of the new rules in the plan year beginning in 2012 and whether to apply the blended rate or the current rate.
IRS and DOL guidance required. Since the IRS has published the monthly rates only since 2001, it will have to develop those rates for the prior 13 years in order to calculate the 2012 25-year average. It will also have to provide guidance on plan sponsor elections regarding use of the new method for 2012 and other transition issues.
The DOL is required by the statute to include language in its model annual disclosure notice addressing the new requirements that apply to underfunded plans.
Other MAP-21 changes that affect pension plans. Other MAP-21 changes that affect single-employer defined benefit pension plans are extension of the ability to fund retiree health benefits from excess pension assets through 2021, addition of the ability to fund retiree group term life insurance benefits from excess pension assets, increase in PBGC premiums and PBGC governance reform, including appointment of an ombundsman. Multiemployer plans will be affected by their own PBGC rate increases and the PBGC governance changes.
Update 8/17: IRS Notice 2012-55 providing guidance on the above-described changes has been released and is available here.
Update 9/11/12: IRS Notice 2012-61 on pension funding stabilization has been released. In addition, PBGC Technical Update 12-1 addresses the effect of MAP-21 on PBGC premiums and PBGC Technical Update 12-2 addresses the effect of MAP-21 on 4010 reporting for pension plans.
As we near the first anniversary of BenefitsBryanCave.com, it is a good time to reflect on the past, such as one of our first posts on the importance of clear eligibility terms in a self-funded health plan. This is a particularly timely reflection because the case discussed on that post was just upheld by the Sixth Circuit Court of Appeals in an unpublished opinion.
For those unfamiliar, in the case, an employee who was participating in a self-funded medical plan went out on FMLA leave. When that leave expired, she did not return to work and the employer put her on short-term disability, but continued to allow her to be eligible for the medical plan. After her short-term disability period expired, the employer offered her COBRA, which she elected.
However, the terms of the medical plan provided that eligible employees were those regularly scheduled to work a minimum of 40 hours per week with an express exception only for FMLA leaves. When the stop-loss carrier inquired about her eligibility, the employer said it had a “corporate practice” of continuing to allow employees on short-term disability to be covered under the plan. The stop loss carrier, however, had only committed to provide its coverage for claims that were covered under the terms of the self-funded medical plan. In arriving at its decision, the court narrowly construed the medical plan’s eligibility provisions. (A few additional details are noted in the prior post.)
As we noted in our prior post, in a battle of the policies (company policy v. stop loss policy), the stop loss policy will usually win. This means that all eligibility criteria should be spelled out in the plan document. Care should be taken to ensure that the language is complete and not prone to narrowing interpretations.
Whether or not an employer has stop loss coverage, it is still important to spell out eligibility clearly. Otherwise, a common risk is the possibility of disputes arising with employees over their eligibility status. In such a dispute, a court is likely to defer to the employer’s interpretation of the plan only if the employer is following the terms of a written plan document.
The bottom line is that an employer should make sure its plan document (medical or otherwise) spells out eligibility clearly so that everyone (the employer, the third-party administration, the employee, and the stop loss carrier) is on the same page.
In a decision released July 24, 2012, the Eight Circuit affirmed a lower court judgment that a plan administrator committed no abuse of discretion when it terminated an employee’s long-term disability benefits. The case, styled Wade v. Aetna Life Ins. Co., No. 11-3295 (8th Cir. July 24, 2012), involved a Quest Diagnostics, Inc. employee’s challenge to Aetna’s termination of her benefits despite a previous, contrary decision from the Social Security Administration (SSA), coupled with allegations of “serious procedural irregularities.”
In its decision, the 8th Circuit began by concluding that the district court had reviewed the termination decision under the correct “abuse-of-discretion” standard. Under ERISA, a court’s review of a plan administrator’s denial of benefits considers whether the benefit plan gives the administrator the discretion to determine eligibility for benefits. Here, the plan unequivocally granted Aetna this discretionary authority. Nevertheless, Wade sought de novo review of Aetna’s termination decision by alleging that Aetna had committed “serious procedural irregularities,” which included Aetna’s failure to provide the plaintiff’s attorney with the operative plan documents for more than two years. Under plaintiff’s desired de novo review, the district court would independently examine the termination of benefits without any deference to Aetna’s previous decision.
Citing the district court’s opinion below, the 8th Circuit observed that the irregularities all took place after the decision to terminate the plaintiff’s long-term disability benefits, as well as the appeal of that decision. The plaintiff had failed to offer any explanation how these irregularities could have affected the termination decision itself (or the appeal). As a result, the Eighth Circuit concluded that any irregularities lacked a “connection to the substantive decisions reached.” Without this connection, the allegations failed to trigger the “sliding-scale” standard of review (see below), and Aetna’s conclusion would be reviewed for only an abuse of discretion.
Next, the 8th Circuit found that Aetna had not abused its discretion by ignoring the SSA’s award of long-term disability benefits to Wade. First, the court noted that plan administrators are not generally bound by the SSA’s disability determinations. Moreover, Aetna’s termination occurred five years after the SSA’s evaluation, with new information that the SSA never considered. Because the court was uncertain that the SSA would have made the same determination upon these facts, they concluded that substantial evidence supported Aetna’s decision to terminate the plaintiff’s benefits. Accordingly, the 8th Circuit affirmed the district court’s judgment.
While the holding itself hardly stretches the imagination, in a footnote the panel interestingly suggested that the Eighth Circuit’s “sliding-scale” approach toward standards of review might be in peril following the U.S. Supreme Court decision in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008).
Over a decade ago, the Eighth Circuit adopted a sliding scale for both conflicts of interest and procedural irregularities in Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir. 1998). (A conflict of interest is said to exist where, as here, an employer or insurance company serves the dual role of administering a plan and making eligibility decisions under that plan.) In the Eighth Circuit, courts would apply a less deferential standard of review to the plan administrator’s decision than abuse of discretion when confronted with a conflict of interest or procedural irregularity. Thus, a “sliding scale” arose, with a spectrum of standards of review available between the highly-deferential abuse of discretion standard and non-deferential de novo review.
In Glenn, however, the U.S. Supreme Court clarified the manner in which conflicts of interest affect a district court’s review of the plan administrator’s eligibility decisions. The Supreme Court concluded that a conflict of interest should be considered a factor in a court’s abuse-of-discretion analysis. In other words, no unique “sliding scale” exists for conflicts of interest, because courts could weigh these conflicts along with any other considerations for an abuse of discretion. As such, Glenn partially overruled Woo. Glenn did not, however, consider how procedural regularities might affect the appropriate standard of review. In its wake, the Eighth Circuit has largely continued to apply its sliding-scale approach in procedural irregularity cases.
While Wade’s actual holdings are certainly instructive—that (1) after-the-fact procedural irregularities will not affect judicial review of a plan administrator’s denial, and that (2) the SSA is not the final word on disability determinations, especially in light of new evidence—the largest implication for administrators may be the possibility of challenges to the Eighth Circuit’s sliding-scale approach for procedural irregularities. Plan administrators benefit from courts reviewing their decisions as deferentially as possible, and the elimination of the sliding-scale approach could potentially obligate courts to consider termination decisions for only an abuse of discretion.
At this point, three obvious solutions are available. First, if Glenn offers any insight on the issue, a procedural irregularity might simply be another factor for courts to consider in determining whether an abuse of discretion existed. At least one Eighth Circuit panel arguably applied this approach in Chronister v. Unum Life Ins. Co. of Am., 563 F.3d 773 (8th Cir. 2009). Nevertheless, the Eighth Circuit has not formally adopted this standard.
Alternatively, the Eighth Circuit could conceivably swing the other direction completely and find that procedural irregularities might trigger de novo review of termination decisions by district courts. This would result in independent review by courts, which would be highly prejudicial to plan administrators.
Finally, the Eighth Circuit could continue on its current path and find that procedural irregularities occupy their own independent sphere within plaintiffs’ challenges to administrator decisions and affirm the sliding-scale approach. In that case, only the Supreme Court would be available to modify the standard.
In short, questions continue to surround the proper standard of review for courts facing allegations of procedural irregularities in the administration of benefit plans. With the proper standard up in the air, plan administrators should be mindful of the relative benefits and challenges they face under any potential standard of review. When the dust settles, however, plan administrators may stand to benefit from a far less compromising standard of review than currently used within the Eighth Circuit.
A recent study by Truven Health Analytics attempts to model the employer and employee cost impact of various strategies for dealing with PPACA’s “play or pay” employer mandates/penalties. The study is notable primarily for two reasons. First, it attempts to take into account the employee, as well as the employer, cost associated with each strategy.
The report essentially concludes that any cost savings an employer may receive will result in a precipitous increase in costs to employees. In effect, Truven is saying that the balance between employer and employee is a zero-sum game (or nearly so): there is no way for an employer to save money that does not result in a precipitous increase in employees’ cost. Furthermore, if an employer attempts to make employees whole for the cost, then it will actually end up costing the employer more than providing health coverage, Truven concludes.
Perhaps more importantly, however, it looks beyond the penalties and costs of health coverage in attempting to quantify the employer cost and also attempts to quantify both the impact on an employer’s other programs (such as workers compensation and short- and long-term disability) and the impact on employee productivity (such as through increased absenteeism). The report is a good summary, but is short on details on how the researchers determine the costs of these collateral impacts.
Even so, it is worth considering whether, and how, the lack of employer control over health insurance could have an impact in these collateral areas. For example, if an employee cannot afford a plan that is as high-quality as the one an employer is able to provide, will that discourage him or her from going to the doctor? Will this deferred health care create a greater likelihood of a workers compensation or disability claim? Additionally, will it result in increased absenteeism thus reducing productivity? Finally, what will the effect be on employee loyalty? Much of the discussion about employers dropping coverage and paying the penalties ignores these collateral impacts. The Truven study suggests the answer to some of these questions is “yes,” but each employer will need to make this assessment based on its own workforce and the level of coverage it is currently offering.
The only apparent easy criticism one could make of the Truven study is to point out that it assumes a 6% health insurance cost increase, which the study says is roughly the average cost increase from 2007-2010. Of course, the dates are highly relevant – none of those years reflect any meaningful implementation of the health care reform law. In fairness, the best Truven could have done (assuming data was reasonably available) was to include 2011. However, even that would have ignored the impact of the health insurance exchanges, community rating requirements, and the full implementation of the guarantee issue provisions, among PPACA’s many other requirements that have yet to be implemented. That’s not to say the Truven study is wrong, just that the actual impact will depend on how viable the exchanges really are and whether they will reduce health insurance costs, as PPACA proponents argue they should.
Finally, the Truven study assumes that employers will continue to offer coverage on the same basis that they currently do (which the study has to assume because there is no way to reliably predict the effect of employer innovation). However, as noted in this issue brief by the Employee Benefits Research Institute, the health reform law has brought renewed interest in employer-run exchanges and “defined contribution”-style health insurance arrangements. As the EBRI issue brief points out (and as we may discuss in a later post), there are potential compliance and other concerns with such arrangements. The bottom line, however, is that employers can, and will, continue to innovate to address health insurance costs. Such innovation may result in a “third path” beyond simply choosing to “play” by the current system or “pay” the penalties.