The Republican Party has withdrawn the American Health Care Act (AHCA), which, if passed, would have affected employer health plans in a number of ways (see our prior alert on the topic here). While the Affordable Care Act (ACA) remains law for now, Republican pursuit of repeal is likely to continue in some manner, whether through new health care legislation or as part of a broader tax reform proposal. Adding to this uncertainty, Democratic legislators may see the withdrawal of the AHCA as an opportunity to introduce legislation to improve the ACA.
Although the future of health care reform remains unclear, there are a number of action items employers who sponsor health plans should consider now as planning and budgeting begins for 2018.
The following ACA rules could have a significant impact on the design of employer health plans:
- The “Cadillac Tax,” which would impose a 40 percent tax on the value of high-cost health plans, is scheduled to go into effect in 2020. Members of both parties have indicated a desire to repeal this tax, and efforts to repeal it may be included in upcoming proposed tax reform legislation.
- Secretary of Health and Human Services Tom Price has invited state governors to apply for “State Innovation Waivers” under the ACA. States applying for waivers must propose an “innovative” approach to their state health care structure that would provide access for high quality, affordable health insurance without raising the federal deficit. If such a waiver proposal is granted by the Department of Health and Human Services, these waivers would allow states an exemption from certain requirements of the ACA.
Plan sponsors of employer health plans are fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) and as such, should undertake the following actions to satisfy fiduciary duties:
- Plan Document Compliance. Plan sponsors should continue to ensure that plan documents are up to date with current law. This includes staying current on any regulatory developments under the Trump administration. President Trump’s Executive Order directing regulatory agencies to minimize the economic burden of the ACA did not include any explicit action items, but suggests that agencies could release guidance relaxing enforcement of ACA requirements.
- Evaluating Reasonableness of Service Arrangements. Vendor relationships, such as those with third-party administrators or consultants, should be evaluated. Service agreements should be reviewed to ensure vendors are carrying out the services they are contractually obligated to perform, and the fees charged should be evaluated to determine whether they are reasonable. If a vendor is acting in a fiduciary capacity (such as a claims administrator), then the service agreement should reflect those responsibilities and the vendor should perform those services in compliance with ERISA’s prudent person standard of conduct.
- Impact of DOL Fiduciary Rule. Plan sponsors should consider the impact of the Department of Labor fiduciary rule on health savings accounts (HSAs). For example, for HSAs with an investment component, plan sponsors should ensure that HSA education communicated to participants does not constitute investment advice. As it stands now, the rule becomes applicable April 10, 2017, unless this applicability date is delayed by the DOL, which is likely (see our alert discussing the DOL’s proposed delay of the applicability date here).
Ongoing Plan Compliance
Employer sponsors of group health plans should continue to ensure plan operations remain compliant. Plan sponsors and plan administrators should consider conducting routine self-audits to make sure the plan is operated in accordance with its terms. In particular, plan sponsors should focus on the following:
- Plan sponsors that are applicable large employers should make certain that full-time employees (those working an average of at least 30 hours per week) are properly identified and offered coverage meeting ACA standards.
- Plan sponsors should confirm that wellness programs meet final rules on nondiscrimination requirements, issued by the Equal Employment Opportunity Commission and effective January 1, 2017 (see our prior alert on these rules here).
- With the onset of Phase 2 of the HIPAA audit program conducted by the Office of Civil Rights to assess HIPAA controls and procedures of covered entities and business associates, plan sponsors should complete a compliance review and ensure group health plans’ HIPAA privacy and security policies and procedures are up to date. We recently hosted a breakfast briefing on this topic in three of our offices; a recording of the event is available here.
- Plan sponsors should make certain that plan documentation and administration are compliant with mental health parity requirements. These rules generally require that group health plans providing mental health or substance use disorder benefits offer them with no greater restrictions than those placed on medical or surgical benefits (such as those that apply to financial requirements or treatment limitations).
We will monitor any developments in all of these areas and continue to keep you updated.