President Trump Signs Executive Order to Make Health Insurance More Available to Small Businesses
- On Oct. 12, 2017, President Trump signed an executive order directing federal agencies to review regulations for association-sponsored health insurance plans, short-term health plans, and health reimbursement arrangements (HRAs).
- Any new regulations will most likely not take effect for a year or more, if they occur at all.
- Businesses should continue to follow the provisions of the Affordable Care Act.
Review of regulations for three health plan options
On Oct. 12, 2017, President Donald Trump signed an executive order directing federal agencies to review regulations for three healthcare plan options:
- Association plans;
- Short-term, limited-duration insurance (short-term health plans); and
- Health reimbursement arrangements (HRAs).
This order does not create any new regulations, nor does it include specific directives for any of these health options. It simply instructs federal agencies to review existing regulations and consider proposing new regulations and guidance.
The order requests federal agencies to:
Expand rules pertaining to association healthcare plans so that more employers are eligible to participate. Currently, federal law permits association plans, but limits the type of entity allowed to form one. Association plans generally allow smaller groups to band together to purchase coverage, spreading claims risk similar to the risk pooling of large-group coverage. President Trump’s order directs the Department of Labor (DOL) to consider proposing regulatory flexibility to expand the types of groups that may offer association-sponsored healthcare insurance.
Some association plans may be regulated in the large-group or self-insured markets. This means that certain requirements that the Affordable Care Act (ACA) imposes on the individual and small-group markets may not apply. For instance, insurers participating in those markets cannot vary premium rates based on health status. Premiums can only vary based on geography, age, and tobacco use. These restrictions on premium variance do not apply to the large-group healthcare coverage market.
Under the ACA, insurers participating in the individual and small-group markets must ensure that their plans cover essential health benefits such as emergency services, hospitalization, and maternity care. Large-group markets and the self-insured market are not subject to these rules.
Lengthen the period of coverage for short-term health plans and allow for their renewal. Short-term health plans are designed to fill temporary gaps in coverage, such as when an individual is making the transition from one health plan to another. Under current regulations, short-term health plans can last no longer than three months, which includes any renewal period. The plans must make clear to applicants, in contract or application, that they do not meet ACA minimum essential-coverage requirements. As a result, a plan holder may incur an individual mandate penalty. Note that the three-month duration coincides with the allowable period under the ACA’s individual responsibility provisions, during which a participant can’t be assessed a penalty for not having health insurance that meets minimum essential coverage requirements.
Offer additional flexibility in how HRAs can be used, including with non-group coverage. The IRS recently sought to redefine use of HRAs with non-group coverage by restricting their use due to the interaction with group market reform rules under the ACA., However, a new statute expanded their use in the non-group markets by carving out certain employers and applying stringent rules to their application.
At the end of December 2016, the government passed an alternative arrangement for HRAs into law. The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) took effect Jan. 1, 2017. To be eligible to use a QSEHRA, a business cannot be defined as an applicable large employer (ALE) under the ACA. Rather, it must be a non-ALE as defined in section 4980H of the Internal Revenue Code and offer no group health coverage to its workforce. The law defines which employees must be eligible for this arrangement. The new executive order might further extend HRAs’ use.
What is the impact?
New regulations for association health-care plans, short-term health plans, and HRAs will not occur quickly, if at all; any changes stemming from this executive order could take a year or more to establish. Existing law addresses these three subjects, and agencies are bound by current law when developing new regulations or guidance. Creating new regulations entails a lengthy administrative process: drafting proposed regulations, accepting public comments, and issuing finalized regulations. Given the potential conflict between federal and state laws, legal challenges may arise.
Nothing has changed in current law regarding health care coverage or insurance options for employers. The President’s new order merely asks federal agencies to review existing regulations and develop proposals within the confines of the law. No one yet knows what form these regulations might take.
For now: Hold steady with the ACA’s provisions
Ensure that your business follows the ACA’s rules regarding healthcare benefits, employee eligibility, and administrative requirements. Keep up with the potential changes to current law so you won’t be caught off-guard if radical shifts occur in the provision of employer-sponsored health insurance. As always, Paychex will monitor this dynamic situation and provide information and assistance to the business community.