The Biden Administration’s $1.9 trillion legislation, the American Rescue Plan, was recently signed into law by President Joe Biden. So when it comes to employee benefits and health care, what can employers expect from a Biden presidency with Democrats winning both House and Senate? Below we take a look at some predictions on what’s to come with a focus on employer group health plans.
The Affordable Care Act
President Biden pledged to “protect and build on” the Obama-era Affordable Care Act (“ACA”), so it is likely that we will see an expansion. The most obvious way to protect the ACA may be to bring back the teeth of the individual mandate by raising the penalty tax above zero again. Biden has also proposed adding a public-run health insurance option to the ACA and expanding subsidies and tax credits for individual insurance. The expanded subsidies would be available to more individuals, including potentially those with affordable, minimum value employer coverage, and would also be more generous. The potential outcome is that employers could lose health plan participants to the public-option if this were to go into effect and become an attractive option for more individuals. Biden also proposed lowering the Medicare age from 65 to 60. Again, this could cause more employees to leave employer-sponsored plans to go on Medicare (if they are eligible). Employers may want to think about reevaluating their benefit offerings to make sure they are competitive. They may also consider how to better communicate the value of the benefits they provide.
Importantly, the ACA’s fate is currently in the hands of the Supreme Court which held oral arguments on November 10. At issue is whether the individual health insurance mandate is still constitutional after Congress reduced the penalty tax for failing to obtain health insurance to $0. As Congress used its taxing power to pass the ACA originally, the argument is that without a tax, there can be no mandate. The next issue becomes, if the mandate is unconstitutional, would it bring down the entire ACA or is that provision severable from the rest of the legislation? On February 10, the Department of Justice under the new Biden Administration submitted a letter confirming the administration’s switch in positions on the ACA and requesting that the entire ACA be upheld. As mentioned above, another possibility is that Congress may increase the individual mandate penalty above zero again to protect the ACA. Obviously, if the entire ACA were deemed unconstitutional, this would lead to a huge change in how employers operated their health plans. However, that outcome seems highly unlikely. We can only wait for the Supreme Court to make its decision
Some commentators speculate that a Biden administration may seek to undo the Trump administration’s individual coverage health reimbursement arrangement (ICHRA) rules. This is based in part on the fact that the Obama administration (where Biden was Vice President) initially prohibited employers from reimbursing employees for the cost of individual coverage. The ICHRA rules allow employers to reimburse employees for their individual coverage premiums rather than offering them a traditional employer-provided group health plan. However, a Biden administration could also view ICHRAs as a way to increase enrollment in the ACA Marketplace/exchanges or a public option (if one is enacted). The ICHRAs may actually turn out to be favorable for the Biden Administration and may be here to stay.
President Biden will likely also work through executive orders and regulations to achieve what policy goals he can within the confines of the law. These are expected to have a more limited effect on employers than any legislation. His administration could seek to expand opportunities for individuals to buy coverage through the ACA Marketplaces/exchanges. Already President Biden opened up a special enrollment period from February 15-March 15, 2021 for the Marketplaces/Exchanges.
Another area under the ACA that we are likely to see some action in is the ACA Section 1557 Nondiscrimination Rules. These rules prohibit discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs or activities. Under the Trump administration, final rules had been issued which eliminated the general prohibition on discrimination based on gender identity and sex-stereotyping impacting health insurance coverage for transgender individuals. However, after the Supreme Court ruled that discrimination based on sex encompasses sexual orientation and gender identity in the context of employment in Bostock, several federal courts issued preliminary injunctions on certain provisions of the final 1557 rules issued by the Trump administration, including a case brought by several religious organizations who sought and won protection under the Religious Freedom Restoration Act. It is likely that Biden’s administration will reissue the 1557 rules as they relate to gender identity. Employers should monitor any changes or guidance in this area to determine whether a change to benefits coverage related to gender transition items and services is warranted. There is a good chance that the 1557 notice obligation could be resurrected as well.
Another set of rules proposed by the Trump administration are the health plan price transparency rules. These rules were authorized by the ACA, but were not proposed until November 2019. Additionally, the most recent COVID relief bill expanded and accelerated some price transparency requirements, potentially requiring some rules to be issued in 2021. As health price transparency has had bipartisan support, these rules are unlikely to be eliminated, so employers are likely to see more disclosure requirements become effective in the near future.
Prescription drug and health care costs
Generally, the desire to lower prescription drug costs is shared by Democrats and Republicans. However, the problem is agreeing on a particular path to accomplish such a goal. Still, areas of potential bipartisan agreement could include allowing drug importation (provided the drugs are safe) or enabling generic medications to come to market more quickly. The movement for regulatory action in this space appears limited. Therefore, any significant developments are only likely to come through bipartisan legislation.
Surprise billing is another area where a Biden administration could potentially find common ground with Republicans. However, hundreds of pages of surprise billing legislation were included in the over 5,500-page COVID relief bill signed at the end of 2020 (The Consolidated Appropriations Act, 2021). Therefore, the Biden administration will now be tasked with issuing and implementing the rules required by that new law (the No Surprises Act). In the meantime, many states are implementing their own laws in this area.
One relatively underreported aspect of President Biden’s health care plan was to aggressively use antitrust enforcement authority to potentially break up large hospital and physician practices. Whether a Biden administration ultimately uses this authority remains to be seen, but this has the potential to reduce health care costs overall, which could benefit employer plans, as well.
COVID-19 response
President Biden’s COVID-19 response plan includes a call for more robust testing and contact tracing to keep the virus under control. He also proposes to make tests and treatment free to everyone. This policy may involve greater participation by group health plans, although given that group health plans are already required to cover testing and vaccines, covering treatment (potentially on a first-dollar basis) might be all that additional legislation could require. More likely is an expansion of COBRA subsidies for terminated workers to allow them to maintain their group health plan coverage (which is also part of the Biden team’s recent COVID-19 relief proposal). Given how long the pandemic has gone on, any retroactive subsidies would be expensive and administratively burdensome to implement, but they are possible.
A Biden administration has also already worked to accelerate the development of vaccines and therapeutics. While some of the branding and key players may continue to change, the fundamental goal of bringing these products to market as safely and efficiently as possible will continue. The addition of COBRA subsidies or potential requirement to include COVID-19 treatment on a first dollar basis could add cost and complexity for employers.
There are a few more legislative items that must be mentioned, although they are not specifically tied to group health plans as they would significantly impact many employers. The first is the American Rescue Plan’s provisions related to raising the federal minimum wage to $15 per hour. It is likely that the wage increase would be phased in over a period of years, rather than a quick jump to $15 overnight. However, this would dramatically impact employer’s costs (especially in states where the minimum wage is still below $8 per hour).
Another item that has employers’ focus is the expanded FFCRA leave. This legislation would extend the leave through September 30, 2021 and would apply to all employers (including those with over 500 employees and those with under 50 employees). Tax credits would only be available to employers with less than 500 employees. The leave would cover a broader group of employees, with no exemptions for health care workers or emergency responders and would provide up to 14 weeks of paid leave at a maximum benefit of $1,400 per week. Employees would be able to use the leave for many of the same reasons they used the original FFCRA, with a few additions, such as to take time off to get vaccinated against COVID-19. Under the Consolidated Appropriations Act, employers with under 500 employees currently have the option to continue to offer FFCRA leave and receive tax credits through March 31, 2021. However, if the expanded FFCRA legislation passes, virtually all employers will be required to offer this expanded leave.
Keep in mind that the wage and leave provisions within the Biden Administration’s legislation may run into issues under the Byrd Rule as Congress pushes the legislation forward through the budget reconciliation process. This rule prevents a reconciliation bill from containing non-budgetary provisions considered extraneous to the federal budget. However, there are ways to structure legislation to ensure it is budget-related. For example, a leave mandate on employers may be hard to tie directly to the federal budget, but could be structured in a way that would prevent it from being deemed “extraneous” by including tax credits or some other provision impacting the federal budget.
Conclusion
With the Biden administration and a Democrat-controlled Senate, the prospects of significant movement impacting benefits compliance are somewhat high. However, if the legislative filibuster survives, then movements are likely to be more muted. Regardless, regulatory changes and increased compliance costs are likely. Employers should keep an eye on Congress for changes in legislation and on the regulatory front to see what changes a Biden administration proposes or undoes.