Alert / Employee Benefits
When it Rains it Pours: A Four-Topic Alert Day

An Executive Order, Final Form 1095-C Instructions, Delay in Disability Claim Regs, Withdrawal of Proposed HIPAA Certification Rules

We have a compliance potpourri today: four recent developments important to welfare benefit plan sponsors. Rather than issue multiple Alerts, we’re packing all the news together.

Executive Order Seeks to Facilitate Association Health Plans, Permit More HRAs to Pay for Individual Market Premium

President Donald Trump issued an Executive Order today aimed at finding additional ways to help hold down health insurance costs for people shopping in the Affordable Care Act (ACA) marketplaces for individual policies and for businesses that are members of trade or professional associations.

The order itself doesn’t make or change law. Rather, as a means to accomplishing White House objectives, it instructs federal agencies to consider new or different interpretations of existing law.

Health Reimbursement Arrangements

Federal rules currently prohibit all but certain small employers from using tax-favored health reimbursement arrangements to fund employees’ premium payments for individual policies in the individual health insurance market. The Executive Order directs the federal agencies responsible for the current rules to consider allowing larger employers to do the same.

Lockton comment: The objective here might be to get larger employers to adopt a “defined contribution” approach to healthcare and drive their employees into the individual health insurance marketplace to further spread the risk in that market. Doing so, however, carries its own risks. Health insurance inflation is running nearly five times higher in the individual market than the group market, which means most employees shopping in the ACA marketplaces will have difficulty getting the same bang for their health insurance buck, particularly over time.

Association Health Plans

The order also asks the Department of Labor (DOL) to consider, within the next 60 days, proposing new rules or re-interpreting existing rules under ERISA to allow more businesses, especially small businesses, to band together for health insurance.

It’s not clear precisely how regulators will go about this, but there are three ERISA rules they might tinker with.

First, they will likely expand ERISA’s definition of “employer.” ERISA plans need to be sponsored by an employer or employee organization, like a union. Regulators might loosen the definition of “employer” to make it easier for associations to be considered an “employer.”

Second, regulators might interpret ERISA’s definition of “multiple employer welfare arrangement” (MEWA) to exclude some or all association plans that would otherwise be considered MEWAs. MEWAs are vulnerable to state insurance regulation, so a MEWA exception for association plans would provide more freedom to those plans to design benefits, particularly via self-insurance, unfettered by state rules.

Third, if the DOL concludes it can’t exempt association plans from ERISA’s MEWA definition, it could outright shield self-insured MEWAs from state regulation. ERISA gives the DOL authority to do this but the Department has never exercised that authority.

Lockton comment: Reliable sources inside the Beltway tell us the DOL has already nearly completed a regulation related to association health plans, which might explain why the president’s order gives the DOL just 60 days to “consider” the matter. It might be that the DOL has been considering the matter already, and for some time.

Beyond the structural issues related to association health plans there will remain key practical questions: Which associations have a risk profile that favors creation of their own risk pools? How does the association maintain that favorable risk profile? How would the program be structured, administered and insured or re-insured? There will certainly be some associations that will benefit from new rules and others that won’t.

Final Instructions for 2017 ACA Reporting Forms

The IRS has issued final instructions for 2017 Forms 1094-C and 1095-C, the forms employers use to report coverage offers to full-time employees under the ACA and months of actual coverage supplied to individuals under self-insured medical plans. The final instructions are available here.

There are few changes from the 2016 instructions. Most notably, there is not yet a “good faith effort” standard for compliance with the 2017 filings, as there has been for prior years. And there is not yet an extension, as there was with prior years, to the January 31 deadline for providing Form 1095-Cs to employees, or the deadlines for filing 1094-Cs and 1095-Cs with the IRS on paper (February 28) or electronically (March 31).

Lockton comment: Please join us for Lockton’s ACA Reporting Octoberfest, our annual October webcast on ACA reporting. If you have not already registered, please do so here. We’ll quickly touch on the basics – who must report, on what forms, how to submit the forms to the IRS and the filing deadlines – but focus primarily on common wrinkles employers encounter with their reporting forms. These include reporting COBRA coverage; reporting mid-year hires, terminations, and transitions from full-time to part-time status; issues related to mergers and spin-offs; and reporting affordability calculations when the employer offers wellness incentives or cash-or-coverage options.

DOL Delays Disability Claim Appeal Rules

Earlier this year the DOL issued final regulations that revised the ERISA claims procedural requirements for disability plans. The new rules included additional protections designed to ensure a full and fair review of disability claims and would have applied beginning January 1, 2018. See our Alert on the final regulations.

Now the DOL has proposed delaying those final rules so they would not apply to claims for disability benefits filed prior to April 1, 2018. The DOL has also asked for additional public comment on the final regulations, including cost estimates for complying with the final rules and comments on the merits of rescinding, modifying or retaining the final rules.

Lockton comment: The final regulations were not particularly welcomed by insurers and employers, as the rules will make administration of disability claims somewhat more cumbersome. Many employers would appreciate seeing the rules withdrawn.

HHS Withdraws Proposed HIPAA Certification Rules

The Department of Health and Human Services (HHS) has formally withdrawn a proposed rule that would have required health plans (including employer-sponsored plans) to certify compliance with HIPAA’s requirements for standardizing certain electronic health plan transactions.

The proposed regulations would have required health plans, under threat of penalty, to submit certain documentation and information to HHS to demonstrate compliance with HIPAA’s electronic transaction requirements.

Lockton comment: The proposed requirements would have imposed new and unwarranted administrative burdens on many health plans. We are pleased to see them withdrawn, applaud HHS for withdrawing them and salute groups like the American Benefits Council, with respect to which Lockton is a board member, for convincing HHS to do so.

Edward Fensholt, JD and Mark Holloway, JD
Lockton Compliance Services

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