On April 5, the “Self-Insurance Protection Act” passed the House and moved to the Senate. This bill, if enacted, would amend ERISA, the Public Health Service Act and the Internal Revenue Code (the “Big 3” statutes containing ACA rules) to exclude from the definition of “health insurance coverage” any stop-loss policies obtained by self-insured health plans or a sponsor of a self-insured health plan. No additional guidance is given regarding what would constitute a “stop-loss policy” under the proposed definition. According to this fact sheet from one Congressional committee, the law appears to address concerns that HHS might one day decide to try and regulate stop-loss insurance. In our opinion, that seems unlikely under the current administration, but it could be a regulatory priority in future administrations.
But what does the Self-Insurance Protection Act mean for state regulation of stop-loss insurance?
As the Department of Labor noted in a prior technical release (and as we have written about previously), states have been attempting to regulate stop-loss insurance and have previously sought to include stop-loss insurance in the definition of “health insurance coverage” under certain circumstances (i.e., policies with attachment points below specified amounts). However, such laws have been found to be preempted by ERISA. In comparison, and as the DOL notes, state laws prohibiting insurers from issuing stop-loss policies with attachment points below specified thresholds are generally not preempted because they regulate insurance, which is an exception from ERISA preemption. The upshot of this is that a state generally cannot force a stop-loss policy with a low attachment point to act like a regular medical policy, but a state could prevent the sale of that stop-loss policy.
It appears that the Self-Insurance Protection Act, in its current form, merely gives an additional argument that stop-loss policies cannot be treated like major medical insurance, no matter how low the attachment point is. This is like the proverbial “belt and suspenders” since treating stop-loss like major medical insurance has been found to be preempted in some cases. The only additional protection is that the federal government would also be prevented from regulating stop-loss like regular health insurance. However, in its current form, the act does not prevent states from requiring stop loss policies to have a minimum attachment point.
In other words, this Act, if it becomes law, would not dramatically change the landscape for stop-loss policies. For most employers considering self-insurance, the key factor from a stop-loss perspective remains understanding what kinds of stop-loss policies your state will allow.
Late on Monday, House Republicans revealed, in two parts (here and here, with summaries here and here) the American Health Care Act (“AHCA”) that is designed to meet the Republicans’ promise to “repeal and replace” the ACA. In many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is. Below is a brief summary of the most important points:
- Employer Mandate, We Hardly Knew You. The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
- OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription. This goes back to the old rules that allowed these reimbursements. This would begin in 2018.
- Reduction in HSA Penalty. One of the pay-fors for the ACA was an increase in the penalty for non-health expense distributions from HSAs from 10% to 20%. The AHCA takes it back to 10% starting in 2018.
- Unlimited FSAs Are (or Would Be) Here Again. AHCA repeals the $2,500 (as adjusted) limit on health FSA contributions starting in 2018.
- Medicare Part D Subsidy Expenses Would Be Deductible Again. The ACA still allowed Medicare Part D subsidies to be excluded from a company’s income, but denied the deduction, for tax purposes, for any expenses that were subsidized. This reinstates the prior law that allowed a “double tax benefit” of both the exclusion of the subsidy from income and the deduction for the costs funded by the subsidy starting in 2018.
- A New COBRA Subsidy. The AHCA does away with ACA’s income-based subsidies in favor of age-based subsidies from $2,000 to $4,000 per individual (with a max of $14,000 for a family) with a phaseout for incomes over $75,000 per year ($150,000 for married filing jointly). However, unlike the ACA subsidies (which could only be used for individual market insurance), the new subsidies would also be available for unsubsidized COBRA coverage. This would not kick in until 2020. The subsidies are adjusted based on the CPI+1, which means they are probably unlikely to keep pace with medical inflation. Additionally, any excess subsidy (which seems unlikely) would be put into an HSA for the individual’s benefit.
- Trading in The Cadillac Tax for a Newer Model Year. Hearing the outcry of employers who did not want their health benefits taxed, the bill instead kicks the Cadillac Tax down the road. Instead of applying in 2020, it now applies in 2025. There is no adjustment to the thresholds in this bill, so it will still pick up coverage that is not all that “Cadillac” (despite its name). Despite being highly unpopular, the Cadillac Tax has basically survived.
- HSA Enhancements. The HSA contribution limits would be increased effective in 2018 so that they are the same as the out of pocket maximums that apply to HSAs (currently $6,550 for self-only coverage and $13,100 for family coverage). Additionally, expenses incurred up to 60 days before the account is established could be reimbursed from the account.
- Continuous Coverage Requirement. In lieu of the individual mandate, the law would require individuals to maintain continuous coverage (with no more than a 63-day break). If they did not, then insurance companies could assess a 30% enrollment surcharge above their regular premium for twelve months. This is designed to encourage individuals to stay in the insurance market, even if they don’t need coverage. Employers will recognize the 63-day break rule from the old HIPAA creditable coverage rules. This is basically the same concept, only applied across both employer plans and the individual market (the HIPAA rules did not apply to the individual market). And unlike the HIPAA rules, the penalty here is a 30% premium increase, whereas under the HIPAA rules, pre-existing conditions could be excluded for a period of time if the individual did not maintain creditable coverage. For employers, this probably mostly would mean a return to having to issue creditable coverage certificates.
The proposed AHCA makes many other changes that are beyond the scope of this post, but these are the ones that are most likely to have an impact on employer plans. Of course, at this point, this is just proposed legislation and there’s no telling how much (if any) of this will survive the legislative process. At least now, however, some legislators have something specific with which to work (and others have something specific to criticize).
Last week, the Department of Labor (DOL) released adjusted penalty amounts which are effective for penalties assessed on or after January 13, 2017, whose associated violations occurred after November 2, 2015. You might remember that these penalties were just adjusted effective August 1, 2016 (also for violations which occurred after November 2, 2015); however, the DOL is required by law to release adjusted penalties every year by January 15th, so you shouldn’t be surprised to see these amounts rise again next year.
All of the adjusted penalties are published in the Federal Register, but we’ve listed a few of the updated penalty amounts under the Employee Retirement Income Security Act of 1974 (ERISA) for you below:
- For a failure to file a 5500, the penalty will be $2,097 per day (up from $2,063).
- If you don’t provide documents and information requested by the DOL, the penalty will be $149 per day (up from $147), up to a maximum penalty of $1,496 per request (up from $1,472).
- A failure to provide reports to certain former participants or failure to maintain records to determine their benefits remained stable at $28 per employee.
Pension and Retirement
- A failure to provide a blackout notice will be subject to a $133 per day per participant penalty (up from $131).
- A failure to provide participants a notice of benefit restrictions under an underfunded pension plan under 436 of the tax code will cost $1,659 per day (up from $1,632).
- Failure of fiduciary to make a properly restricted distribution from a defined benefit plan will be $16,169 per distribution (up from $15,909).
- A failure of a multiemployer plan to provide plan documents and other information or to provide an estimate of withdrawal liability will be $1,659 per day (up from $1,632).
- A failure to provide notice of an automatic contribution arrangement required under Section 514(e)(3) of ERISA will also be $1,659 per day per participant (also up from $1,632).
Health and Welfare
- For a multiple employer welfare arrangement’s failure to file a M-1, the penalty will be $1,527 per day (up from $1,502).
- Employers who fail to give employees their required CHIP notices will be subject to a $112 per day per employee penalty (up from $110).
- Failing to give State Medicaid & CHIP agencies information on an employee’s health coverage will also cost $112 per day per participant/beneficiary (again, up from $110).
- Health plan violations of the Genetic Information Nondiscrimination Act will also go up to $112 per day per participant/beneficiary from $110. Additionally, the following minimums and maximums for GINA violations also go up:
- minimum penalty for de minimis failures not corrected prior to receiving a notice from DOL: $2,790 (formerly $2,745)
- minimum penalty for GINA failures that are not de minimis and are not corrected prior to receiving a notice from the DOL: $16,742 (up from $16,473)
- cap on unintentional GINA failures: $558,078 (up from $549,095)
- Failure to provide the Affordable Care Act’s Summary of Benefits and Coverage is now $1,105 per failure (up from $1,087).
The penalty amounts listed above are generally maximums, but there is no guarantee the DOL will negotiate reduced penalties. If you’re already wavering on some of your new year’s resolutions, we recommend you stick with making sure your plans remain compliant!
Only hours into the new administration, steps were taken to eliminate, or at the very least minimize the impact of, the Patient Protections and Affordable Care Act (“ACA”). In his first Executive Order, President Trump affirmed his intent to repeal the ACA and further sought to minimize the economic burden of the ACA. The order instructs the Secretary of Health and Human Services and the heads of all other executive departments and agencies to, “take all actions consistent with the law to minimize the unwarranted economic and regulatory burden of the act, and prepare to afford the states more flexibility and control to create a more free and open healthcare market.”
This is not a repeal of the ACA (the President cannot unilaterally do that). However, what it means is that the agencies responsible for overseeing ACA implementation (HHS, Treasury, and Labor) are tasked with finding ways to lessen the law’s impact. That can only be done through future rule making and other guidance. While we do not have a crystal ball, we expect to see several more sets of FAQs that will mitigate the impact of the law and potentially a suspension of the enforcement of such items as the employer play or pay mandate and the individual mandate. Whether any of that comes to fruition remains to be seen, but it seems reasonable to expect that the less popular aspects of the law will be the initial targets of future guidance.
What does this mean for employers faced with compliance obligations and potentially onerous noncompliance penalties? It’s too early to tell for certain and definitely too early to abandon compliance obligations. The secretaries of the three agencies have not been confirmed yet, and in fact, the Labor Secretary-designate Puzder is not scheduled to have his first confirmation hearing until February 2. The best course is still the one we advised in an earlier post: continue your compliance obligations – and keep your eye on twitter.
It has been an eventful 10 days in the courts and in Congress for halting impending regulations and setting the stage to roll-back new rules implemented by the Obama Administration. Employers can expect a repeal of recently passed regulations is on the horizon in the area of benefits regulation.
ACA — 1557 Regulations: Discrimination Based on Gender Identity or Pregnancy Termination
A nationwide injunction prohibiting the Department of Health and Human Services (HHS) from enforcing nondiscrimination rules promulgated under ACA section 1557 as they relate to discrimination on the basis of gender identity or termination of pregnancy was imposed by a federal judge on December 31, 2016. (Franciscan Alliance, Inc. v. Burwell, N.D. Tex., No. 16-cv-108, 12/31/16) The plaintiffs argued that section 1557 regulations forced health care professionals and religious-based facilities to provide gender transition services against their medical judgment and religious beliefs.
Regulations under 1557 have been challenged in a number of suits across the country, the most recent being a case filed by a collection of Catholic organizations in North Dakota. (Catholic Benefits Ass’n v. Burwell, D.N.D., No. 3:16-cv-432, filed 12/28/2016) Plaintiffs are arguing that the rules improperly require religious health-care organizations and benefits providers to provide services and insurance coverage relating to certain procedures that are in violation of their religious beliefs.
Since the passage of these regulations, employer-sponsors of health plans have been scrambling to determine if the rules require that they cover gender reassignment, among other things. Generally speaking, most employer-sponsored health plans are not “covered entities” under Section 1557 because they do not receive direct subsidies from HHS.
The remaining antidiscrimination provisions of the 1557 regulations which prohibit discrimination on the basis of disability, race, color, age, national origin, or sex other than gender identity, were generally effective January 1, 2017.
The DOL Fiduciary Rule: Proposed 2-Year Delay for Effective Date (H. R. 355)
A bill was introduced by Rep. Joe Wilson (R-S.C.) on 1/6/2017 proposing a 2-year delay in the effective date of the DOL Fiduciary Rule. The Fiduciary Rule is scheduled to take effect April 10, 2017, with full compliance required by January 1, 2018.
Republicans have repeatedly challenged the DOL Fiduciary Rule, but presumably stand a better chance of success under President-elect Donald Trump.
En Bloc Reconsideration of Agency Regulations by Congress – Retroactive Consideration
Bills have been introduced in both the Senate (S.34) and the House (H.R 21) that would empower Congress to make a wholesale repeal at once of multiple regulations that were passed by the Obama Administration in the last half of 2016. The House passed the Midnight Rules Relief Act (H. R. 21) on 1/4/17, one day after it was introduced. The Senate bill was introduced 1/5/2017.
The measures amend the Congressional Review Act (“CRA”) to allow Congress to repeal multiple rules and regulations in one joint resolution. The CRA currently requires that regulations be considered individually.
Regulations promulgated in the last half of 2016 by the Department of Labor and the Department of Health and Human Services as well as other agencies could come under review under these bills.
New Requirements of the Process of Agency Adoption of Regulations
Two bills have been introduced in the House to add substantial Congressional review of regulations promulgated by governmental agencies, such as the National Labor Relations Board, The Equal Employment Opportunity Commission, and the Department of Labor. The “Executive in Need of Scrutiny Act” (H. R. 26) and the “Regulatory Accountability Act of 2017” (H.R. 5) substantially limit agencies by requiring multiple additional steps in the rulemaking process.
The “Executive in Need of Scrutiny Act” (H. R. 26) requires Congress to act before any major rules take effect. Under the bill, an agency promulgating rules would have to publish certain information in the Federal Register and include in its report to Congress and to the Government Accountability Offices 1) a classification of the rule as major or non-major, and 2) a copy of the cost-benefit analysis of the rule that includes an analysis of any jobs added or lost. The bill includes standards for determining if a rule is major or non-major and sets forth the congressional approval procedure for major rules and the congressional disapproval procedure for non-major rules.
The “Regulatory Accountability Act of 2017” (H.R. 5) likewise imposes a number of steps on the formulation of new regulations and guidance documents, clarifies the nature of judicial review of agency interpretations, and requires a rigorous analysis of potential impacts of proposed rules on small entities.
In the latest round of FAQs on ACA implementation (now up to 35 if you’re keeping track), the DOL, HHS and Treasury Department addressed questions regarding HIPAA special enrollment rights, ACA coverage for preventive services, and HRA-like arrangements under the 21st Century Cures Act.
Special Enrollment for Group Health Plans. Under HIPAA, group health plans generally must allow current employees and dependents to enroll in the group health plan if the employee or dependents lose eligibility for coverage in which they were previously enrolled. This FAQ clarifies that an individual is entitled to a special enrollment period if they lose individual market coverage. This could happen, for example, if an insurer covering the employee or dependent stops offering that individual market coverage. However, a loss of coverage due to a failure to timely pay premiums or for cause will not give the employee or dependent in a special enrollment right.
Women’s Care: Coverage for Preventive Services. The Public Health Service Act (PHS Act) requires non-grandfathered plans to provide recommended preventive services without imposing any cost-sharing. Recommended preventive services that must be covered include the women’s preventive services provided for in Health Resources and Services Administration’s (HRSA) guidelines.
HRSA updated its guidelines on December 20, 2016. The updated guidelines build on many of the existing preventive care for women and include screening for breast cancer, cervical cancer, gestational diabetes, HIV, and domestic violence, among other items. The services identified in the updated guidelines must be covered, without cost-sharing, for plan years beginning on or after December 20, 2017. For calendar year plans, that’s the plan year starting January 1, 2018. Until those guidelines become applicable, non-grandfathered plans are required to continue providing coverage without cost-sharing consistent with the previous HRSA guidelines and the PHS Act.
Qualified Small Employer Health Reimbursement Arrangements. Since 2013, the DOL, IRS and HHS published guidance (here, here and here) addressing the application of the ACA to HRAs. This guidance explained that HRAs and similar arrangements that are used to pay or reimburse for the cost of individual market policies will fail to comply with the ACA because the arrangements, by definition, reimburse or pay medical expenses only up to a specified dollar amount each year and would not meet other ACA requirements. Prior to this guidance, smaller employers would sometimes reimburse employees for individual policies instead of obtaining their own group policy. This guidance made such a practice impermissible and could subject employers to penalty taxes of $100 per day per individual for violations.
To address concerns raised by application of the ACA reforms to certain arrangements of small employers, the 21st Century Cures Act created a new type of tax-preferred arrangement, the “qualified small employer health reimbursement arrangement” (QSEHRA) to reimburse for medical expenses, including coverage on the individual market. This special arrangement is effective for plan years beginning after December 31, 2016. For calendar plan years, this means the QSEHRA exclusion is effective January 1, 2017. For plan years beginning on or prior to December 31, 2016, the relief under Notice 2015-17 applies (which we discussed in a previous post).
To be a QSEHRA under the Cures Act, the arrangement generally must:
- Be funded entirely by an eligible employer (generally, an employer that had fewer than 50 full-time equivalent employees in the prior year and does not offer a group health plan to any of its employees);
- Provide for payment to, or reimbursement of, an eligible employee for expenses for medical care as defined in Code section 213(d);
- Not reimburse more than $4,950 ($10,000 for families) of eligible expenses for any year; and
- Be provided on the same terms to all eligible employees of the employer.
While a QSEHRA is not a group health plan for ACA or COB RA purposes, the 21st Century Cares Act does not really address how (or whether) other ERISA rules apply to QSEHRAs. Additional guidance in these areas would be helpful.
On Friday, IRS and the Department of Treasury issued Notice 2016-70 granting an automatic 30-day extension for furnishing 2016 Forms 1095-B, Health Coverage, and 1095-C, Employer-Provided Health Insurance Offer and Coverage, to individuals for employers and other providers of minimum essential coverage (MEC). These forms must now be provided to individuals by March 2, 2017 rather than January 31, 2017. Coverage providers can seek an additional hardship extension by filing a Form 8809. Notice 2016-70 provides that individual taxpayers do not need to wait to receive the Forms 1095-B and 1095-C before filing their tax-returns.
The due date for 2016 ACA filings (Forms 1094-B, 1094-C, 1095-B, 1095-B) with the IRS remains February 28, 2017 (or March 31 if filed electronically). Employers and other coverage providers can request an automatic 30-day extension for filing these forms with the IRS by submitting a Form 8809 before February 28, 2017. Notice 2016-70 advises that employers and other coverage providers that do not meet the relevant due dates should still furnish and file the forms, even if late, as the Service will take such action into consideration when determining whether to abate penalties for reasonable cause.
Regarding penalties, Notice 2016-70 extends the good faith standard for providing correct and complete forms that applied to 2015 filings. The penalty for failure to file a correct informational return with the IRS is $260 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000. The same level of penalty applies for failure to provide an accurate payee statement. The good-faith relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement and not to failure to timely furnish or file a statement or return.
When evaluating good faith, the Service will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service. In addition, the Service will take into account the extent to which an employer or other coverage provider is taking steps to ensure it will be able to comply with reporting requirements for 2017. No penalty relief is provided in the case of reporting entities that do not make a good-faith effort to provide correct and accurate returns and statements or that fail to file an informational return or furnish a statement by the due dates.
Treasury and the Service do not anticipate extending this relief with respect to due-dates or good-faith compliance for future years.
In the latest round of ACA and Mental Health Parity FAQs (part 34, if you’re counting at home), the triumvirate agencies addressed tobacco cessation, medication assisted treatment for heroin (like methadone maintenance), and other mental health parity issues.
Big Tobacco. The US Preventive Services Task Force (USPSTF) updated its recommendation regarding tobacco cessation on September 22, 2015. Under the Affordable Care Act preventive care rules, group health plans have to cover items and services under the recommendation without cost sharing for plan years that begin September 22, 2016. For calendar year plans, that’s the plan year starting January 1, 2017.
The new recommendation requires detailed behavioral interventions. It also describes the seven FDA-approved medications now available for treating tobacco use. The question that the agencies are grappling with is how to apply the updated recommendation.
Much like a college sophomore pulling an all-nighter on a term paper before the deadline, the agencies are just now asking for comments on this issue. Plan sponsors who currently cover tobacco cessation should review Q&A 1 closely and consider providing comments to the email address firstname.lastname@example.org. Comments are due by January 3, 2017. The guidance does not say this, but the implication is that until a revised set of rules is issued, the existing guidance on tobacco cessation seems to control.
Nonquantitative Treatment Limitations. Under applicable mental health parity rules, group health plans generally cannot impose “nonquantitative treatment limitations” (NQTLs) that are more stringent for mental health and substance use disorder (MH/SUD) benefits than they are for medical/surgical benefits. “Nonquantitative” includes items like medical necessity criteria, step-therapy/fail-first policies, formulary design, etc. By their very nature, these items are (to use a technical legal term) squishy.
Importantly for plan sponsors, the agencies gave examples of impermissible NQTLs in Q&As 4 and 5. In Q&A 4, they describe a plan that requires an in-person examination as part of getting pre-authorized for inpatient mental health treatment, but does preauthorization over the phone for medical benefits. The agencies say this does not work.
Additionally, Q&A 5 addresses a situation where a plan implements a step therapy protocol that requires intensive outpatient therapy before inpatient treatment is approved for substance use disorder treatment. The plan requires similar step therapy for comparable medical/surgical benefits. So far, so good. However, in the Q&A, intensive outpatient therapy centers are not geographically convenient to the participant, while similar first step treatments are convenient for medical surgical benefits. Under these facts, applying the step therapy protocol to the participant is not permitted. The upshot, from the Q&A, is that plan sponsors might have to waive such protocols in similar situations. This particular interpretation will not be enforced before March 1, 2017.
Substantially All Analysis. To be able to apply a financial requirement (e.g. copayment) or quantitative treatment limitation (e.g. maximum number of visits) to a MH/SUD benefit, a plan must look at the amount spent under the plan for similar medical surgical benefits (e.g. in-patient, in-network or prescription drugs, as just two examples). Among other requirements, the financial requirement or treatment limitation must apply to “substantially all” (defined as at least two-thirds) of similar medical/surgical benefits.
The details of that calculation are beyond the scope of this post, but Q&A 3 sets out some ground rules. First, if actual plan-level data is available and is credible, that data should be used. Second, if an appropriately experienced actuary determines that plan-level data will not work, then other “reasonable” data may be used. This includes data from similarly-structured plans with similar demographics. To the extent possible, claims data should be customized to the particular group health plan.
This means that, when conducting this analysis, plan sponsors should question the data their providers are using. If it is not plan-specific data, other more general data sets (such as data for an insurer’s similar products that it sells) may not be sufficient. Additionally, general claims data that may be available from other sources is probably insufficient on its own to conduct these analyses.
Medication Assisted Treatment. The agencies previously clarified the MHPAEA applies to medication assisted treatment of opioid use disorder (e.g., methadone). Q&As 6 and 7 provide examples of more stringent NQTLs and are fairly straightforward. Q&A 8 addresses a situation where a plan says that it follows nationally-recognized treatment guidelines for prescription drugs, but then deviates from those guidelines. The agencies say a mere deviation by a plan’s pharmacy and therapeutics (P&T) committee, for example, from national guidelines can be permissible. However, the P&T committee’s work will be evaluated under the mental health parity rules, such as by taking into account whether the committee has sufficient MH/SUD expertise. Like we said, it’s squishy.
Court-Ordered Treatment. Q&A 9 specifically addresses whether plans or issuers may exclude court-ordered treatment for mental health or substance use disorders. You guessed it — a plan or issuer may not exclude court-ordered treatment for MH/SUD if it does not have a similar limitation for medical/surgical benefits. However, a plan can apply medically necessary criteria to court-ordered treatment.
The Bottom Line. The bottom line of all this guidance is that plan sponsors may need to take a harder look at how their third party administrators apply their plan rules. Given the lack of real concrete guidance, there’s a fair amount of room for second guessing by the government. Therefore, plan sponsors should document any decisions carefully and retain that documentation.
Now that the historic election between the two most unpopular candidates in recent memory has been called for Donald Trump, the questions (of which there are many) now facing the President-Elect and the rest of us are how a President Trump will govern. One of his campaign promises (and a favorite Republican talking point) was the repeal of the Affordable Care Act and replacing it with something else. (Its recent premium hikes were even cited by his campaign manager as a reason voters would choose him.) So is that going to happen?
At this point, we cannot know for sure (and given the beating that prognosticators took this election cycle, we’re not sure we want to guess). However, we can identify a few hurdles that might make it harder.
Republicans Need a Plan First. One of the major hurdles is Republicans themselves have yet to completely agree on a coherent alternative. Speaker Ryan released a thumbnail sketch of a proposal in June which looked more like “pick and choose” than “repeal and replace.” However, it is often said the devil is in the details and that will certainly prove true here.
And Then They Have to Agree On It. The other challenge is getting enough Republican votes to get the plan through (and maybe some Democratic ones as well). As of now, the GOP is still projected to retain majorities in both the House and Senate. However, some races are still too close to call and, at least at the moment, it looks like their majorities will be smaller than they were coming out of the 2014 mid-term elections. Particularly in the House, this means the Freedom Caucus could have a stronger voice and prevent consensus on a Republican plan. And then there’s the question of whether Congress and the President can agree on any plan as well.
The Democrats Could Also Filibuster. Given that Democrats have been resistant to sweeping ACA changes proposed by Republicans, they could filibuster any legislation that makes its way to the Senate. The Republicans, as of now, are projected only to have a simple majority in the Senate, and well less than the 60 votes needed to shut down a filibuster (which will be true even if the remaining races are all called their way).
There are other hurdles, but these are the obvious political ones that stand in the way of an ACA repeal and replace strategy.
That’s not to say, however, that Trump can do nothing. He will appoint the heads of Treasury, Labor, and Health and Human Services and will likely get his appointees confirmed with relative ease, given Republican control of the Senate. Those appointees will have the authority to write any remaining rules and a chance to rewrite existing rules. That said, regulatory changes will be somewhat constrained by the existing statutory framework and concerns about insurance market disruption. However, because Congress has largely given over the authority to interpret the laws to the Executive Branch, President Trump’s appointees may be able to take wider latitude than you would think to rewrite existing rules.
For now, plan sponsors should continue with compliance as they always have. Nothing of significance is likely to change between now and President Trump’s inauguration in January. Even after that, it will take some time (and some political maneuvering) for any huge changes to get implemented.
Update 11/10/16: Some readers have asked whether the Republicans could use the reconciliation process in the Senate (which bypasses the filibuster and only requires a simple majority of 51 Senators) to achieve their goals. The good lawyerly answer is “yes and no.” Reconciliation actions have to have a budgetary impact, so a full repeal and replacement is not really possible using that process. However, Republicans could strip out several aspects of the act (like the play or pay employer mandate or the premium tax credits for individual insurance) through that process, effectively making the law unworkable. It wouldn’t be a full repeal and replacement, but it might do enough damage to the law bring the possibility of a repeal and replacement to the table.
As promised in Notice 2015-68, the IRS has proposed clarifications to the regulations under IRC Section 6055 relating to information reporting rules for minimal essential coverage providers. These rules affect employers sponsoring self-funded health plans or self-funded health reimbursement arrangements (HRAs) that coordinate with insured plans. These proposed regulations also address how employers and others solicit taxpayer identification numbers (TINs) to facilitate this reporting. These rules only impact employers and others who report on the B-series forms (1094-B and 1095-B). They do not change the reporting or solicitation rules for the C-series forms (1094-C and 1095-C).
Reporting Requirements for Employers Providing Multiple Types of Health Coverage
Information reporting is generally required of every person who provides minimum essential health coverage to an individual. However, in some cases, this reporting would be duplicative, such as where an individual is covered under a major medical plan and an HRA. Some employers and insurers complained that the existing rules preventing this duplication were confusing. The proposed regulations seek to clarify the rules on duplicate reporting.
One change is that an entity that covers an individual in more than one plan or program must only report for one of the plans or programs. Therefore, if an employer has both a self-funded health plan and an HRA that covers only the same people who are enrolled in the self-funded plan, then reporting is only required for the self-funded plan.
Additionally, if an employer offers an insured plan, but then also offers an HRA to employees enrolled in that insured plan, reporting on the HRA is not required. Here, the insurer would be required to report on the insured plan, so the IRS would already be notified that the employee has health coverage and the HRA reporting would be unnecessary.
On the other hand, if an employer offers an HRA to employees who are enrolled in their spouses’ employer’s plan, then the employer would have to report on employees covered by the HRA. These arrangements are not very common, but they do exist. This reporting still seems duplicative, but it seems that the IRS made this change to simplify the rules. Of course, this “simplification” just results in additional reporting for employers with these arrangements.
TIN Solicitation Rules
Under the reporting rules, coverage providers have to solicit TINs (which include social security numbers) if they are not provided by the employees. This is because the TINs appear on the reporting forms for every individual covered under the arrangement. There were preexisting rules for soliciting TINs that we wrote about previously. However, in response to concerns that the TIN solicitation rules were designed primarily to apply to financial relationships rather than Code Section 6055 information reporting, the proposed regulations provide specific TIN solicitation rules for Section 6055 reporting. These changes do not apply to the reporting on the C-series forms, so they will only apply to employers sponsoring self-funded plans and other coverage providers, but not to employers offering insured plans, for example. The existing rules timed the requests for TINs off of when an account is “open.” Under these rules, one solicitation generally occurs at the time the account is opened and then there are two annual solicitations after that if the TIN is not obtained.
These new rules include specifying the timing of when an account is considered “open” for purposes of Section 6055 reporting and when the two annual TIN solicitations must occur. The proposed regulations provide that, for the purpose of Section 6055 reporting, an account is considered “opened” on the date the filer receives a substantially complete application for new coverage or to add an individual to existing coverage. This could be before the coverage is actually effective or after (in the case of retroactive coverage, such as due to certain HIPAA special enrollment event). As such, health coverage providers may satisfy the requirement for initial solicitation by requesting enrollees’ TINs as part of the application for coverage.
The proposed regulations also specify the timing of the first and second annual TIN solicitations. Under these regulations, the first annual solicitation must be made no later than seventy-five days after the date on which the account was “opened” or, if coverage is retroactive, no later than the seventh-fifth day after the determination of retroactive coverage is made. Basically, this would be within 75 days after the application for coverage (or the time that application is approved, in the case of retroactive coverage). The second annual solicitation must be made by December 31 of the year following the year the account is “opened”.
To provide relief with respect to individuals already enrolled in coverage, if an individual was enrolled in coverage on any day before July 29, 2016, then the account is considered “opened” on July 29, 2016. Accordingly, employers have satisfied the initial solicitation requirement so long as TINs were requested as part of the application for coverage or at any other point prior to July 29, 2016. The deadlines for the first annual solicitation can then be made within 75 days after July 29 (or by October 12, 2016) and the second annual solicitation can be made by December 31, 2017.
Reliance and Proposed Applicable Date
These regulations are generally proposed to apply for taxable years ending after December 31, 2015. Employers may rely on these proposed regulations (and Notice 2015-68) until final regulations are published.