Alert / Retirement, Employee Benefits
Lawmakers consider employer health and retirement plan issues

The midterm elections are quickly approaching, but legislators continue to consider health and retirement plan changes before breaking for the final push on the campaign trail. Few major legislative changes are expected for employers before the November elections, but current negotiations will help set the agenda for postelection legislation.

Opioid package may impact employer health plans

Bipartisan legislation aimed at addressing the opioid crisis recently passed the Senate. The House previously passed a similar package in June; however, employers will want to keep an eye on two important differences between the House and Senate bills that must be reconciled before a final package can go to the president’s desk.

First, the House bill included a provision forcing group plans to pay for three more months of end-stage renal disease (ESRD) treatment before that cost is shifted to Medicare. The provision is estimated to increase employer costs by $450 million over ten years. See our prior Alert. The provision was included to help pay for new spending authorized by the House bill. The Senate bill does not contain the same spending authorizations, so there was no need to include the ESRD pay-for.

Lockton comment: Lobbying groups are pushing for the reconciled bill to include additional spending, which increases the need for more revenue, whether through the ESRD pay-for or otherwise. Lockton and several coalitions like the National Coalition on Business are urging Congress to exclude the ESRD pay-for, as it will raise costs on the 181 million Americans who have employer-sponsored health coverage.

Second, the House bill included a provision eliminating a privacy law predating HIPAA, which limits when providers can share data about substance use treatment. The change would, among other things, allow group plans to implement disease management programs targeting opioid abuse. The Senate bill does not contain a similar provision.

Lockton comment: The proposal does not change HIPAA or any of the other laws that limit the use and disclosure of health information. For example, employers would not be able to use substance use information for employee disciplinary action.

The two chambers are expected to reconcile the differences in their respective bills over the next several weeks, with an initial draft reconciliation bill possible this week.

House GOP’s "Tax Reform 2.0" legislation looks to retirement reforms

Currently, the House and Senate have more than 30 separate retirement reform proposals in various stages. One in particular, the Senate’s Retirement Enhancement and Savings Act (RESA), would be the most comprehensive retirement reform legislation in more than a decade. See our prior Alert. RESA has bipartisan support in the both the Senate and the House, but the House has not voted on it for what we understand to be political reasons. Instead, the House has put forth its own retirement proposals as part of Tax Reform 2.0, which includes three separate bills:

  • The Family Savings Act (H.R. 6757)
  • The Protecting Family and Small Business Tax Cuts Act (H.R. 6760)
  • The American Innovation Act (H.R. 6756)

The Family Savings Act is the bill that includes the retirement proposals, some of which are good, and some of which are not so good for employer plan sponsors. The major red flags found in the House bill are outlined:

  • Allows anyone 18 years of age or older to contribute up to $2,500 (after tax) annually to a universal savings account and use the tax-free withdrawals for any purpose at any time. Earnings in the account would not be taxed, unlike a traditional savings account. This could significantly deter from an already deficient retirement savings system.
  • No enhanced automatic enrollment provision.
  • No provision of lifetime income illustrations in private-sector retirement plans.
  • No expansion of IRA ownership of S-corporation bank stock.

The Family Savings Act does include some provisions favorable to employers:

  • Reforms the nondiscrimination rules for soft-frozen defined benefit plans, clarifying that a plan that passed the nondiscrimination tests at the time it was soft-frozen will be deemed to pass the tests as long as it is not amended in any discriminatory manner and meets certain other conditions.
  • Expands open multiple employer plans (MEPs), including elimination of the “one bad apple rule,” under which the disqualification of a single employer in a MEP causes the whole plan to lose its tax qualification status.
  • Establishes a fiduciary safe harbor for employers to use in selecting an annuity provider for their defined contribution plans.
  • Allows the users of 529 education savings to pay for apprenticeship fees to learn a trade, cover the cost of home schooling and help pay off student debt. The legislation also allows users of the savings plan to open a 529 account in the name of an unborn child.
  • Provides penalty-free access to retirement savings to cover expenses related to a new child, whether by birth or adoption.

Lockton comment: The retirement provisions have support from both parties in the House and Senate and alone are likely one of the few discretionary packages that could get passed this year. The unfortunate story, however, is that the chance of passage dramatically decreases when the proposals are combined with broader tax relief provisions like a reduction in the corporate rate or permanent individual rate cuts. Nevertheless, there are indications GOP lawmakers may be willing to separate out the retirement reforms to be separately considered after the midterm elections.

House punts on consideration of changes to ACA employer provisions

We previously wrote about a package of bills the House planned to consider, which among other things, would have further delayed the Cadillac tax and changed full-time status under the Affordable Care Act (ACA) to 40 hours per week instead of 30. Consideration of the package was initially delayed due to Hurricane Florence, and now it appears that the package has been completely dropped from the House’s agenda.

Lockton comment: Immediate passage through the Senate was never expected even if the proposals would have made it through the House. The premature death of the package in the House dooms the package for now, but components of the proposal, namely a Cadillac tax delay, could resurface after the election.

Proposals aim to control unexpected medical bills

A bipartisan group of senators released draft legislation that attempts to control medical costs for patients in three ways:

1. Patients obtaining emergency care from an out-of-network provider in an out-of-network facility cannot be billed for the difference between the provider’s charges and the amount paid by the patient’s health plan, a practice termed balance billing.

Lockton comment: Current law requires plans to apply in-network cost-sharing (e.g., coinsurance) requirements in these situations. The law gives plans some flexibility in determining what it pays the provider but allows the provider to balance bill the patient. The new proposal sets a more rigid standard for plan payments to providers, which might impact employer costs.

2. Patients will be responsible for only in-network cost-sharing when receiving nonemergency care at an in-network facility by an out-of-network provider, and the provider cannot balance bill the patient.

Lockton comment: This part of the proposal also sets out a formula for determining how much the plan must pay the out-of-network provider, which might impact employer costs. Lockton is conducting analysis on what the cost impact may be.

3. Patients who obtain emergency care at an out-of-network provider must be notified by the facility and given the option to transfer to an in-network facility instead of continuing with the care at the typically more expensive out-of-network facility. The proposal does not address how the costs of a requested transfer are to be allocated.

Another proposal aims to give states more authority over air ambulance rates and balance billing practices. Proponents of a provision in legislation to reauthorize funding for the Federal Aviation Administration argue that one reason for high air ambulance costs is a federal law that limits how states can regulate providers of air ambulance services. Among other things, the new proposal would give states more authority to regulate rates, balance billing practices and availability requirements.

Lockton comment: The cost-savings impact of providing states with more regulatory authority remains an open question. States already have this type of regulatory authority over many other service providers, but most states have few or no limitations in place. For example, a recent report found that fewer than half of states have rules providing balance-billing protections.

Scott Behrens, J.D.
Director, Government Relations

Sam Henson, J.D.
Director, Legislative & Regulatory Affairs, Retirement Services

Not legal advice: Nothing in this Update should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Government Relations group are not privileged under the attorney-client privilege.

The communication is offered solely for discussion purposes. Lockton does not provide legal or tax advice. The services referenced are not a comprehensive list of all necessary components for consideration. You are encouraged to seek qualified legal and tax counsel to assist in considering all the unique facts and circumstances. Additionally, this communication is not intended to constitute US federal tax advice, and is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending any transaction or matter addressed herein to another party.

This document contains the proprietary work product of Lockton Government Relations and is provided on a confidential basis. Any reproduction, disclosure, or distribution to any third party without first securing written permission is expressly prohibited.

Investment advisory services offered through Lockton Investment Advisors, LLC, an SEC-registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.

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