Employer groups largely cheered the White House’s executive order proposing changes to the Affordable Care Act as a potentially positive move for business, but many unanswered questions remain as to the practical implications of the order and whether or not past abuses will resurface.
The memorandum from President Donald J. Trump, signed Thursday, directs regulators to look into reforms for expanding access to healthcare through association health plans, short-term, limited-duration insurance for individuals and health reimbursement arrangements.
Below are some of the core issues for employers to watch.
Timing of any changes is unclear — and implementation may be slow. While the order is big news for the healthcare industry, it will take months, if not years, for any specific changes to go into effect. The White House is effectively directing the major agencies involved in healthcare — the Treasury Department, the Department of Labor and the Department of Health and Human Services — to study and consider proposing regulations or more informal guidance related to the reforms outlined in the memorandum.
Some parts of the order might be fairly straightforward to implement. It’s possible the IRS could, for example, rescind guidance from 2013 that barred employers from using HRAs to reimburse employees for premiums paid toward non-group coverage. (A law passed last year permits use of the arrangements for employees buying plans on the individual exchanges at businesses with fewer than 50 workers.) HRAs are employer-funded, tax-advantaged accounts used to pay for medical expenses.
Others components of the order, particularly surrounding the creation of association plans, will likely take more time. Association plans allow similar businesses to band together and purchase health insurance together.
In cases where the agencies decide to significantly revise or write new regulations to meet the directives laid out by the White House, the process could easily take years.
“They says in the EO that they plan to do full notice and comment. So in my mind, that could be a very long process, as much as two years to get a final regulation sometimes,” says James Gelfand, senior vice president for health policy at the ERISA Industry Committee.
Instability in the individual markets could limit use of HRAs. Katy Spangler, senior vice president for health policy at the American Benefits Council, says that the Council had long supported efforts to expand use of HRAs, because they offer employers more flexibility.
Employers could, for example, use the arrangements to provide funding to part-time workers who would go and purchase insurance on the individual markets.
But efforts to encourage use of the accounts could be counteracted by another White House decision made Thursday to stop cost-sharing reduction payments to insurers participating on the exchanges. The payments reimburse insurers for discounted care provided by law to lower income families.
Many are concerned that suspension of the payments will further destabilize the individual markets and increase premium costs, which could in turn make it less likely that employers would use HRAs to help subsidize those purchasing insurance through the exchanges.
Suspension of the payments “definitely adds a layer of complexity” to the news surrounding a potential expansion of HRAs, Spangler says.
Association plans come with the potential for abuse. Expanded use of association plans could be a possible boon for small employers, although experts note that more detail is necessary before it’s clear how exactly the setup will work.
“The true impact can’t be understood until there are detailed regulations,” says Arthur Tacchino, principal and chief innovation officer at SyncStream Solutions, a healthcare compliance software provider.
Carol Calhoun, a lawyer in the employee benefits practice at Venable, says that while the approach potentially gives small employers more choice, it’s not yet clear how successful the effort will be. It’s not known, for example, whether more associations are going to want to participate if the rules are relaxed.
“It’s one more option for small employers to look at — and the question is how available is it going to become,” she says.
She adds that the approach could lead to what’s known as “state shopping,” where associations choose a state with fewer regulations and then offer the plans more broadly, something that occurred before the ACA passed.
Gelfand notes that similar types of plans — known as multiple employer welfare arrangements — have been subject to abuses in the past, particularly in the late 1980s and early 1990s. That’s something that regulators will need to keep top of mind as they write new rules for expanding association plans.
“In the past there’s been problems — allegations of fraud and abuse and people losing money, plans not being what they’re supposed to be — that’s always a worry, but hopefully regulators will approach these issues with that under their belts,” he says.
