As reported earlier here, the House Education and Workforce Committee advanced three health care bills on March 8, 2017. These bills are not part of the American Health Care Act, which is moving through the House of Representatives under budget reconciliation procedures. They are therefore very unlikely to be enacted into law because they cannot be passed by the Senate without the support of at least 60 senators. There are intimations, however, that the bills may be passed by the House in conjunction with the AHCA, and thus they are worthy of a closer look.
The Self-Insurance Protection Act
This legislation amends the Employee Retirement Income Security Act (ERISA), the Public Health Services Act, and the Internal Revenue Code definitions of “health insurance coverage” to exclude stop-loss coverage for self-insured group health plans. Stop-loss insurance covers claims incurred by self-insured plans that exceed certain threshold limits and functions much like reinsurance. The intention of this provision is to preempt state regulation and forestall federal regulation of stop-loss coverage as health insurance.
The Affordable Care Act and state insurance codes regulate group health plans. ERISA, however, preempts state insurance regulations with respect to self-insured group health plans. Self-insured plans are also not subject to some of the ACA regulations that govern small group plans, such as the essential health benefit requirement. Some commenters have expressed concern that small group plans could evade state and ACA requirements by entering into arrangements with stop-loss insurers under which the stop-loss insurer would assume most of the risk of the coverage as well as providing administrative services, essentially offering a high deductible form of insurance.
Some states, therefore, have attempted to limit or regulate stop-loss coverage to protect small group enrollees, and the Obama administration considered clarifying their right to do so. Some business groups have in turn objected to this regulation.
The Self-Insurance Protection Act seems to be an attempt to preempt such state laws. It does not appear, however, to preempt the state’s ability to regulate stop-loss coverage as non-health insurance under ERISA’s general savings clause, which preserves state regulation of insurance. Some states might do so even if the law were adopted.
The Preserving Employee Wellness Program Act
This bill is intended to preempt Equal Employment Opportunity Commission (EEOC) regulation of workplace wellness programs under the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA). The ACA (and the Health Insurance Portability and Accountability Act before it) allows employer group health plans to penalize employees for not participating in wellness programs as long as the wellness programs meet certain requirements intended to discourage discrimination against employees on the basis of health status. Health-contingent wellness programs must, for example, offer reasonable alternatives to program participants who are unable to achieve a standard or participate in an activity because of their health.
The ADA restricts the ability of employers to require employees to provide health information, while GINA limits their ability to require disclosure of genetic information, including family health information. Both laws, however, allow employees to voluntarily provide information in conjunction with employee wellness programs. EEOC regulations promulgated in 2016 defined the circumstances under which wellness programs could penalize employees for not providing information without rendering the provision of that information not “voluntary.”
Although the EEOC rules allow wellness programs to impose penalties of up to 30 percent of the cost of self-only employee health coverage on employees who refuse to complete health risk screening assessments (and an additional 30 percent of the cost of self-only coverage for refusals to provide health information on covered spouses), they do impose some additional limits on employer information requests. The GINA rule, for example, prohibits collecting medical information on an employee’s children or genetic information not related to a manifested disease. Employers have objected to the constraints that the EEOC rules place on them with respect to information collection, and this bill is a response.
The Preserving Health Wellness Act would provide that workplace wellness programs (including programs that are not part of a group health plan) are exempt from ADA and GINA information disclosure requirements as long as they meet the ACA wellness program requirements. As the ACA does not address the information reporting prohibitions contained in the ADA and GINA, the bill would effectively repeal these requirements with respect to wellness programs. The bill would also explicitly declare wellness programs to be protected by the ADA’s insurance underwriting safe harbor from ADA regulation, a position rejected by the EEOC. Employers would explicitly be allowed to collect information on manifested diseases or disorders among family members of employees.
In sum, the statute would repeal separate ADA and GINA information reporting requirements as they apply to wellness programs, and thus largely preempt EEOC jurisdiction over such programs.
The Small Business Health Fairness Act (SBHFA)
This legislation would authorize the creation of nationwide insured and self-insured small business association health plans (AHPs) and protect them from state insurance regulation. This legislation has been proposed for many years; a very similar proposal passed the House in 2003. Business associations have pushed for this legislation, arguing that it would allow small groups to band together to obtain less expensive health coverage, and would free such groups from burdensome state regulation. Consumer organizations, insurers, and state regulators have opposed this legislation, arguing that AHPs have a history of fraud, insolvencies, and cherry picking.
This is by far the longest of the three pieces of legislation and is very technical. The bill defines AHPs as group health plans sponsored by bona fide trade, industry, or professional associations, or chambers of commerce or other bona fide associations organized for a substantial purpose other than obtaining or providing medical care. The sponsoring organization must be a permanent organization that receives support and membership dues from its members; it must not base membership or the amount of dues on the health status of an employer-member’s employees or their dependents.
Although the bill has “small business” in its title, it does not explicitly limit the AHPs it permits to small businesses; indeed it suggests that individual market AHPs might be covered. AHPs would be certified by the Department of Labor (DOL) if they meet the standards set out in the SBHFA.
Fully Insured AHPs Versus Self-Insured AHPs
AHPs may be either fully insured or self-insured. The DOL may certify fully insured AHPs (which provide only health insurance benefits) if they file the proper forms and pay required fees. Self-insured AHPs must offer one or more benefit options other than health insurance coverage (which presumably could be as little as some sort of discount program) and, 1) be a grandfathered plan in existence at the time the SBHFA was adopted, 2) be sponsored by a chamber of commerce or other organization that represents a broad cross section of trades and businesses, or 3) represent one or more of about two dozen listed trades, businesses, professions, or industries, or other trades, businesses, or industries having average or above-average risk of health claims. The sponsor must have met these requirements for at least three years preceding an application for certification. Self-insured plans must also have at least 1,000 participants or beneficiaries (although it is possible some of these could be part of an insured plan option).
The AHP sponsor must have a board of trustees with fiscal control over the plan and responsibility for its operations. The board of trustees must be selected from the owners, officers, directors, or employees of the participating employees. Except with respect to grandfathered plans, contract administrators cannot serve on the board and the participation of service providers on the board is limited. The board has the sole authority to approve applications for participation in the plan and to contract with service providers to the plan. Special rules apply to group health plans established by franchisers for their franchisees.
Each participating employer in an AHP must be the sponsor, a member of the sponsor, or, if additional requirements are met, an affiliated member of the sponsor. All individuals covered by the AHP must be active or retired owners (including self-employed individuals), officers, directors, or employees of or partners in participating employers or their beneficiaries (although the bill suggests that at least for professional associations, individuals could be members even though their employer is not). Affiliated members may only be offered coverage if they were affiliated members of the AHP at the time of certification or if they did not offer, for the 12-month period preceding the date of offering of health coverage through the AHP, any group health plan to their employees who would be eligible to participate in the AHP.
Health Status And Benefits
AHP participating employers may not, on the basis of health status, exclude some individual employees from AHP coverage and instead enroll them in individual market coverage. Employers who meet permissible contribution and participation requirements must be offered all geographically available coverage options (although the bill gives the board of trustees “sole authority” for approving membership, suggesting that issue is not guaranteed to all applicants). AHPs must also comply with ERISA’s preexisting condition exclusion ban, health status underwriting prohibition, and guaranteed renewability requirement. Contribution rates may not vary based on the health status of employees or their beneficiaries or on the type of trade or business in which an employer is engaged. The SBHFA does allow insurers, however, to vary premiums based on claims experience or as permitted by state insurance regulations pertaining to bona fide associations. AHPs must comply with other requirements imposed by the DOL.
AHPs have sole discretion to determine what medical benefits they will offer subject to the federal mandates that preceded the ACA—the “drive through delivery” prohibition and mental health parity and mastectomy reconstruction mandates. They are also subject to state laws under which approval of a policy type offered by a plan was initially obtained to the extent that the law prohibits exclusion of a specific disease from coverage.
Solvency
Much of the bill is taken up with provisions for ensuring the solvency of self-insured AHPs. Given the history of financial troubles that have plagued AHPs, this is entirely appropriate. The bill defines levels of reserves, surplus, and stop-loss coverage that self-insured AHPs must maintain. The surplus requirement is set at the exact same dollar level as in the 2003 bill, leaving one to wonder whether any attempt has been made to keep the bill updated over the years. (The remainder of the bill is essentially identical to the 2003 version). The DOL can allow AHPs to meet financial responsibility requirements through other approaches than those set out in the SBHFA. The SBHFA also establishes a national Association Health Plan Fund to which self-insured plans contribute as a guarantee fund for AHPs and gives the DOL authority to oversee the financial stability of self-insured AHP plans.
The SBHFA sets out the application and certification requirements for AHPs, including the filing fee ($5,000) that they must pay and the information that must be included with the application. AHPs must identify the states in which they intend to do business, include copies of their contracts with contract administrators and other service providers, and provide financial information. AHPs must also give written notice of their certification to states in which at least 25 percent of the participants and beneficiaries of the plan are located. AHPs must give the DOL notice of material changes and self-insured AHPs must file annual reports with the DOL. Self-insured plans must engage a qualified actuary to review actuarial information submitted by the AHP.
The SBHFA requires AHPs to provide 60 days’ notice of termination with a plan for winding up their affairs. It also requires self-insured AHPs to take corrective action to ensure compliance with financial responsibility requirements. It provides for mandatory termination of AHPs that fail to meet financial responsibility requirements. It authorizes the DOL to apply to a federal district court to place a financially hazardous self-insured AHP under trusteeship and establishes the powers of trustees and the jurisdiction of the courts to appoint them.
The SBHFA permits states to impose nondiscriminatory premium taxes on self-insured AHPs with respect to premiums or contributions paid by residents of the state who are covered by an AHP, as long as the tax rate does not exceed that which the state imposes on other group health plans. In general, small groups must consist of at least two employees or participants, but states can decide to allow one person groups as small groups rather than regulate them as individual insurance. Certified AHPs are legally considered to be ERISA employee welfare benefit plans.
Preemption Of State Laws
At the heart of the SBHFA is its extensive preemption of state laws that regulate insurance. Congress amended ERISA in 1982 to give the states authority to regulate self-insured multiple employer welfare arrangements (MEWAs) and to ensure the financial stability of insured MEWAs because of extensive MEWA fraud and financial problems. The SBHFA expressly preempts this authority with respect to AHPs. It also expressly preempts any state law (except for criminal laws) that would preclude health insurers from offering AHP coverage.
The SBHFA preempts state laws that would preclude insurers from offering insurance policies that they offer to AHP members to employers who are eligible for AHP membership but do not participate in an AHP plan. If any one state approves an insurance policy form for offering to AHP members, any other state in which the policy form is filed may not disapprove the policy under its laws. The preemption provisions of the SBHFA, however, do not preempt state laws applicable to insurers relating to solvency standards or the prompt payment of claims.
The SBHFA further amends ERISA to provide that two or more trades or businesses can be deemed a single employer for determining if a group health plan is a single employer plan if the trades are businesses are within the same control group. A common control determination, however, may not require an ownership interest of more than 25 percent, and only 75 percent of the employees participating in an arrangement need be employed by one employer for it to be considered a single employer arrangement. These provisions apparently address controversies that have arisen in some states as to whether a group health plan is a MEWA, which can be regulated by the state, or a single employer plan, which cannot be, and could significantly diminish state regulatory control.
The SBHFA establishes criminal penalties for willful misrepresentations by AHPs and allows the DOL to obtain cease and desist orders against unauthorized AHPs or AHPs not operating in accordance with legal requirements. It also requires AHPs to comply with ERISA claims procedure requirements. AHPs must also disclose in their summary plan descriptions the solvency or guarantee fund protections that apply to each benefit option.
If enacted, the SBHFA will become effective one year after enactment. AHP arrangements that have been in existence for at least 10 years with at least 200 participating employers will be grandfathered in with respect to certain provisions of the SBHFA.
AHP proposals long antedate the Affordable Care Act, and are not really part of the ACA repeal effort. AHPs have been a source of a great deal of trouble in the past, and it is not obvious why they need to be further deregulated going forward. Small group offers of employee health coverage have declined in recent years, but not dramatically. Premium increases in the small group market have been significant, but similar to those in the employer market and much lower than those in the individual market. The recently adopted CURES Act allows small employers to help their employees pay for individual market coverage through health reimbursement accounts, increasing coverage options for small groups.