HEALTH PLANS IN THE LIMELIGHT ONCE AGAIN Wally

HEALTH PLANS IN THE LIMELIGHT ONCE AGAIN Wally Miller Schwabe Williamson & Wyatt

ASSOCIATION HEALTH PLANS

PRE-ACA • Prior to 2014, health insurance offered to members of a bona fide association was considered large group coverage, regardless of purchased by individual, small employer group, or large employer group 3

PRE-ACA • Bona Fide Association Status: – Actively in existence for at least 5 years – Constitution and bylaws – Formed for purpose other than to purchase insurance 4

PRE-ACA • As large group coverage, association coverage was exempt from small employer community rate pooling rules • Could also cover individuals who were members of the association • Although a single policyholder, each employer was considered a sponsor of its own separate plan for ERISA purposes 5

ACA (2014) • Ceased to recognize associations as a separate market • Association coverage is either group (small or large ) or individual market • However, a "bona fide group plan" can qualify as a single plan under ERISA (MEWA) qualifying for large employer market status 6

ERISA BONA FIDE PLANS • ERISA bona fide plan status allows avoidance of: – Guaranty issue – Essential health benefits – Rating rules – Single risk pools • Bona fide status requires plan be maintained by a "group or association of employers" acting in the interest of an employer 7

ERISA BONA FIDE PLANS • Participating employers must be bound by a common economic or representation interest (the "commonality of interest standard”) • The plan must be controlled by the participating employers (rather than the association) • All participating employers must be "employers, " meaning sole proprietors are not eligible 8

COMMONALITY OF INTEREST • Generally requires that all employers: – Be within the same industry in the same geographical local – Have a history of organized coordination on matters unrelated to benefits 9

CONTROL STANDARD • Employers that actually participate in plan must have control over plan – Amendments and termination • Association itself cannot unilaterally run the show • Typically, a “Group Insurance Board” is established – Members voted in by employers 10

EMPLOYERS ONLY • Only employers can participate • Sole proprietors, partnerships and LLCs can join only if they have common-law employees 11

ERISA BONA FIDE PLANS • A bona fide group plan is a single plan for purposes of ERISA. • The plan sponsor files a single 5500 • A Form M-1 must be filed before the effective date, and then each year, with the DOL • The Oregon Insurance Division requires an opinion letter from an ERISA attorney regarding satisfaction of bona fide standards 12

PROPOSED AHP REGULATIONS 13

PROPOSED AHP REGULATIONS • One of three directives included in Trump Executive Order (10/12/17) – Expand the scope of current commonality-ofinterest; and – Promote AHP formation on basis of common geography or industry • A plan will be allowed to rely on the current DOL “subregulatory” standards, or the new AHP regulations 14

NEW COMMONALITY OF INTEREST • Employers must be: – In the same industry or profession; or – Have a principal place of business within the same state or metropolitan area • Coverage can cross state lines (subject to above) • Employers can band together for the sole purpose of purchasing insurance 15

NEW BONA FIDE STANDARDS • Must have proper organizational structure – Governing board – By-laws or equivalent • Control by participating employers – Regular nomination and election of officers 16

NONDISCRIMINATION • Cannot condition employer participation on employees’ clean bill of health • May not treat employer-members as distinct group of similarly-situated employees – Differing rates among employers must be based on HIPAA similarly-situated criteria (e. g. , geography) 17

WORKING OWNERS • Plan must restrict coverage to: – Common-law employees; and – “Working Owners” • Working owners must: – Work at least 30 hours per week (or 120 hours per month) or – Have earned income exceeding cost of coverage – Not be eligible for subsidized coverage under another plan (such as a spouse’s plan) 18

SELF-INSURED PLANS • ERISA generally provides that states can fully regulate (or even prohibit) self-insured MEWAs • However, ERISA also provides that the DOL may issue regulations exempting self -insured MEWAs from general state governance • Not doing so now, but has requested comments 19

WHO’S AGAINST, AND WHY? • Comment period ended March 6, 2018 – 720 comments • 13 Democratic States Attorneys • Various Citzens – Both claim undermines the ACA protections • Insurance companies – Unless state regulation – Don’t want self-insurance allowed 20

WHO’S FOR, AND WHY? • House Committee of Education and Workforce • Chambers of Commerce – No longer subject to same industry rule • Realtor Boards – Can offer to individual • ASPPA – But wants to be able to sell to all individual members of 501(c)(6) associations 21

SHORT-TERM POLICIES

SHORT-TERM POLICIES • Are not “excepted benefits” • Instead are expressly excluded from ACA’s definition of individual health insurance • Short-term not defined – Obama administration proposed a definition of 3 months – Proposed regulation defines it as fewer than 12 months 23

SHORT-TERM POLICIES • Can deny based on health status • Can exclude coverage for pre-existing conditions • EHB coverage not required • Annual and lifetime limits permitted • No cost-sharing limits 24

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STAND-ALONE HEALTH REIMBURSEMENT ARRANGEMENTS (HRAs) 26

STAND-ALONE HRAs • Prior to 2014, very popular for small businesses • ACA now generally prohibits – May only have integrated HRAs • Small employers may now have a Qualified Small Employer Health Reimbursement Arrangement (“QSEHRA”) 27

QSEHRA • Available only if employer: – Had fewer than 50 FTEEs in preceding year; and – Does not offer group health coverage to any employees 28

QSEHRA • Maximum amount of available reimbursement per year (for 2018) is: – $5, 050 for employee-only coverage – $10, 250 for family-coverage • Amounts reimbursed may reduce premium tax credit • Can reimburse S-Shareholder 29

QSEHRA • Participation must be made available to all employees, other than: – Employees younger than age 25 – Part-time and seasonal employees – Bargaining unit employees • Carryovers permitted, but doesn’t increase statutory limit 30

QSEHRA • • • No employee contributions Proof of major med coverage required Same terms for all eligible employees Waiting period must be limited to 90 days Can’t provide a different benefit to excludable employees • No deductible can be imposed 31

ACA ESRP EXCISE TAX

ACA ESRP EXCISE TAX • Two Play-or-Pay penalties – “A” penalty for failing to cover 95% of FTE (70% for 2015) – “B” penalty for not offering affordable MEC coverage to an FTE who receives a premium tax credit 33

ACA ESRP EXCISE TAX • IRS is sending out proposed penalty notices – Form 226 J – For 2015 – For “A” penalty only • Common error – Failing to declare eligibility for 70% threshold – Failing to declare offering of MEC to 70% of FTEs 34

ACA ESRP EXCISE TAX • 30 day response deadline (Form 14764) – Extension can be requested – Challenge requires signed statement • Check 2016 and 2017 Forms – File amended returns if errors discovered 35

STATE INITIATIVES

IDAHO • Governor issued Executive Order allowing state-based health plans with pre-ACA standards • Insurer must also offer exchange policy • Features include: – Pre-existing conditions exclusion permitted, subject to pre-ACA creditable coverage rule – Certain minimum benefits must be provided (but not all EHBs) 37

IDAHO • Features (continued) – Age 26 standard remains – $1 million annual limits – No maximum OOP limit – Full preventive coverage not required • May have non-maternity plan, if other maternity plan offered • HHS has responded, saying don't mess with the ACA – But will it enforce? 38

IOWA • ACA governs group health plans and governs health insurance insurers • An “insurer” is defined as a company subject to state law that regulates insurance 39

IOWA • Iowa passed law declaring that health coverage offered by nonprofit agricultural organization is exempt from state insurance laws – Iowa Farm Bureau • Consequently, can offer non-ACA, nonregulated insurance • Seems like a solid loophole 40

QUIZ SHOW 41

QUIZ SHOW • Wally attains age 65 on May 6, 2019. He waits a year, and on July 1, 2020, at age 66, retires and applies for Medicare. He becomes an HSA Ineligible Individual on: [ [ [ ] May 6, 2019 ] January 1, 2020 ] July 1, 2020 42

QUIZ SHOW • HMO region-specific employer has out-ofstate salesperson • Can the employer reimburse the salesperson for the premiums for an individual policy? [ [ ] Yes ] No 43

ONE PARTICIPANT HRA PLANS • The ACA market reform rules do not apply to plans with fewer than 2 participants who are active employees • Ergo, a one-participant plan is permitted • Remains subject to other ACA laws, ERISA and the IRC 44

QUIZ SHOW • Self-insured employer has employee with gigantic Rx bills • Can the employer induce the employee to waive coverage, and provide reimbursment for an individual policy? [ [ ] Yes ] No 45

QUESTIONS? 46