December 2017 | Vol. I, Issue 7 | Center for Health

This periodic e-newsletter is provided to keep conference benefits officers and other United Methodist Church (UMC) employer representatives informed about the Affordable Care Act (ACA) and evolving health care landscape—and the impact on you as an employer/plan sponsor. Please share this Health Care Reform Update with church administrators and others in your annual conference or organization. Contact Wespath Benefits and Investments at healthcare_reformupdate@wespath.org with article ideas or if you would like to share your organization’s experience in a future issue. Articles 2017—Year in Review IRS Sending Penalty Letters Re: ACA Employer Mandate 2017—Year in Review Wespath Benefits and Investments (Wespath) remains committed to keeping United Methodist Church (UMC) plan sponsors up to date with relevant information, and has been monitoring legislative developments and regulatory actions pertinent to health care reform that move beyond just a possibility to a probability (e.g., a bill passed by one house of Congress and likely to be passed by the other). There has been notable activity during 2017. This article provides a summary of key milestones. January–May 2017 In January 2017, Wespath published two Health Care Reform Update newsletters: one about the technical steps needed to pass legislation to change the Affordable Care Act (ACA); and another about what steps are necessary before an Executive Order has any substantive effect. In May 2017, Wespath published another Health Care Reform Update about the bill passed by the House in May to repeal and replace the ACA. However, the Senate did not pass the bill, and it did not become law. These articles are available here: Potential Scenarios ACAExecutive Order—Key Considerations House Passes American Health Care Act Additional 2017 activity related to health care reform is described below. Legislative Branch Activity Efforts to repeal and replace the ACA or modify its provisions continued throughout 2017, as summarized below. Later in 2017, Congress focused on changing the tax law, with potential implications for the ACA. The House passed a bill, H.R. 1 (called the “Tax Cuts and Jobs Act”), but it did not change any provisions of the ACA. On December 2, the Senate passed a different version. A conference committee met and produced a compromise bill—a version of which has now been passed by both houses of Congress and is headed to President Trump. If he signs it, the tax bill will become law. There is only one provision in the bill relating to the ACA, but it could be significant. The bill would repeal the Individual Mandate penalty after December 31, 2018. Thus, 2018 would be the last year in which an individual could be penalized for not obtaining health coverage (“minimum essential coverage”), as mandated in the ACA. This repeal could have a significant impact on the ACA’s public Exchanges, described in more detail later in this article. Executive Branch Activity President Trump has issued a number of Executive Orders this year relevant to the ACA. On January 20, 2017, an Executive Order directed the heads of federal agencies to do whatever they could to reduce burdens caused by the ACA. As explained in Wespath’s ACA Executive Order—Key Considerations article, the Executive Order itself does not change any regulations or policies. The heads of agencies have discretion to interpret and apply the law, but generally cannot change prior final regulations without going through a process required by the Administrative Procedure Act: 1) publish proposed regulations, 2) allow time for comment, and then 3) publish final regulations after demonstrating that consideration has been given to the comments made. Only one notable change was made by HHS, as noted in the October 4, 2017 bullet below.   Additional Executive Orders included one to reduce regulation generally (January 30, 2017)—This order directed agencies to eliminate two regulations for each new regulation passed.   On October 4, 2017, the Department of Health and Human Services (HHS) published a withdrawal of proposed regulations that would have required health plans to file a certificate of compliance, demonstrating that they were following certain rules adopted under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) dealing with electronic transactions.   On October 12, 2017, another Executive Order directed the heads of specific agencies to consider changes in their interpretation of the laws governing health reimbursement arrangements (HRAs), short-term limited duration insurance (STLDI), and association health plans (AHPs). The Order indicates the goal would be to make such types of coverage more easily available. As with the other orders, unless and until an agency decides to make a change (as HHS did in withdrawing the proposed HIPAA regulation), the orders themselves do not have any legal impact. STLDI and AHPs are described in more detail below (Other Regulatory Activity).   Later in October, the IRS issued a notice (Notice 2017-67) regarding Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), a type of HRA that became available for certain small employers earlier this year as a result of the “Cures Act” legislation (passed in late 2016 and signed by then-President Obama on December 31, 2016). The Notice fills in certain details concerning the requirements of the Cures Act for such HRAs. As noted in the Wespath article earlier this year, the Cures Act may have limited value for UMC churches, since it is only available if an employer does not offer any other health plan for its employees. To date, the Department of Health and Human Services (HHS) has not issued additional guidance or regulations on traditional HRAs.   Other Regulatory Activity STLDI and AHPs—Following the October 12 Executive Order, no additional guidance or regulations have been issued yet concerning STLDI or AHPs, but the current law on these is set forth below. STLDI is a form of short-term health insurance, such as a person might seek to cover a gap between jobs. STLDI is defined as coverage that has an expiration date less than 12 months after the original effective date. Because STLDI policies are intended to be short-term only, the ACA does not require STLDI policies to cover the full range of “essential health benefits1” that public Exchange plans must cover. Therefore, STLDI policies typically cover fewer services and cost less than the more robust Exchange policies. Under the Obama Administration, HHS issued proposed regulations to limit these policies to less than three months, including extensions. The October 2017 Executive Order in effect suggests that HHS might withdraw these proposed regulations and issue new proposed regulations or guidance, so that such short-term policies could last for periods longer than three months and be renewable. AHPs fall under the general category of health plans sponsored by multiple employers. Under current law, if multiple employers are under common control they are considered one employer, and the plan will be treated as an employer welfare plan under ERISA. If the employers are not under common control but are connected by a sufficient common interest (for example, a group of Dunkin’ Donuts franchises and their distribution center), their plans can also be treated as an “employer plan” under ERISA. The ACA does not require large ERISA employer plans to cover all of the essential health benefits that public Exchange policies must cover. (They must provide “minimum value,” a concept that HHS has detailed in regulations and other guidance, but this can be done without providing all 10 essential health benefits outlined in the ACA.) Current rules published by the Department of Labor provide the rules for determining the degree of common interest required for employers in such an arrangement to be considered an AHP. The Executive Order essentially directs the Department of Labor to consider changing these rules to allow employers with weaker degrees of common interest to form AHPs. Exchanges In addition to the developments described above, much of 2017 has been devoted to speculation about the future of the public Exchanges. Since the ACA has not been repealed, the Exchanges continue to function. However, HHS did reduce the time for enrollment through HealthCare.gov to a shorter period this year (ending December 15, 2017).2 In addition, President Trump directed the cessation of payments the government had been making to insurance companies that are required by the ACA to reduce or eliminate cost-sharing (i.e., deductibles, co-pays, etc.) their policies normally require, for individuals whose income is low (100-250% of the federal poverty line). This caused some concern that the Exchanges might be destabilized, and that may prove to be the case in some areas. However, in most states, the insurance companies had worked with the state departments of insurance to anticipate this development. Thus, while premiums have generally gone up for those without any subsidy from the government, individuals with subsidies have seen little impact. In fact, in some states, individuals with subsidies are able to buy Exchange policies for 2018 without paying any premium. As noted above, though, the tax bill just passed in December would end the Individual Mandate penalty, so that starting in 2019 there would be no penalty if an individual failed to obtain health coverage. The Congressional Budget Office (CBO) predicts that this will reduce the number of individuals with health insurance, mainly because healthier people will be less likely to buy insurance. The CBO estimates that this will trigger increases in premiums in the individual market by about 10% in most years of the next decade, which in turn will cause more people to drop or not obtain coverage. The CBO predicts that most individual insurance markets will remain stable, but that in 2019 about 4 million fewer individuals will have health coverage, and by 2027 about 13 million fewer individuals will have coverage. The CBO estimates that this will save the federal government about $338 billion by eliminating various payments, including government-funded premium tax credits to lower-income individuals. In addition to enabling individuals to purchase insurance, the public Exchanges also provided venues for small employers to purchase group policies for their employees [under the Small Business Health Options Program (SHOP)]. The Centers for Medicare and Medicaid Services (CMS) published a proposed rule in the second half of this year, indicating that the SHOP program would provide reduced services beginning in 2018. Specifically, the rule would eliminate the following services previously performed by the federally-facilitated SHOP: enrollment in a plan, employee eligibility determinations and premium aggregation functions. Instead, an eligible small employer could sign up directly with a SHOP-approved insurance company, or sign up through a broker. (As of the publication date of this article, the proposed rule has not yet been finalized.) 1Essential health benefits as defined under the ACA cover 10 categories, including (1) emergency services, (2) outpatient (ambulatory) care, (3) hospitalization, (4) maternity and newborn care, (5) mental health, (6) prescription drugs, (7) rehabilitative and habilitative services, (8) preventive/wellness services and chronic disease management, (9) lab services and (10) pediatric medical, oral and vision care. 2Individuals in state-based exchanges may have more time to enroll, as well as individuals affected by certain hurricanes and some other exceptional circumstances. More information is here. Return to Top IRS Sending Penalty Letters Re: ACA Employer Mandate The following article was published previously in Wespath’s On Board Express e-newsletter (December 14, 2017). In November 2017, the IRS announced that it plans to send preliminary letters to large employers3 in late 2017, to begin the process of imposing penalties for violations of the Employer Mandate under the Affordable Care Act (ACA). By early December, some large employers had begun receiving such letters. The letters are designed to begin enforcement of the requirement that applicable large employers either offer health coverage to full-time employees or pay a penalty (the “Employer Shared Responsibility Payment”). This requirement is often referred to as the “Employer Mandate.” The IRS indicates that it plans to send the preliminary letter if: (1) one or more of the employer’s full-time employees received an ACA premium tax credit for one or more months in 2015, and (2) the employer’s Form 1094-C and Form 1095-C do not show that it offered the employee an affordable plan (or that the employer was eligible for an exemption from the requirement to offer coverage). An employer receiving one of these letters will have 30 days (from the date of the letter) to respond. The employer can either agree with the penalty and pay it, or can dispute the penalty. It is possible that the IRS letters will be based on erroneous information, since they are based on tax returns filed by the employees (indicating receipt of premium tax credits), and on the Forms 1094-C and 1095-C filed by the employers (or by third parties hired by employers to file these forms). The IRS description of the information the letter will be based on is available here. A sample of what the letter looks like is available here. More information about the process is available on the IRS website at this FAQs sheet (see FAQ 55-58). If the employer files a response indicating disagreement with the IRS’s letter, the IRS will respond. If the IRS does not accept the employer’s position, the employer can request a pre-assessment conference by filing a formal protest within 30 days with the IRS Office of Appeals. Instructions for filing an appeal with the IRS or providing corrected information for consideration are provided in the letter. Questions about these letters should be directed to the IRS. 3 Only “applicable large employers” (ALEs) may be eligible for employer shared responsibility penalties. See this 2015 article for more information. Return to Top Disclaimer: This e-newsletter is provided by Wespath Benefits and Investments as a general informational and educational service to its plan sponsors, the annual conferences, plan participants and friends across The United Methodist Church. It should not be construed as, and does not constitute, legal advice nor accounting, tax, or other professional advice or services on any specific matter; nor do these messages create an attorney-client relationship. Readers should consult with their counsel or other professional adviser before acting on any information contained in this newsletter. Wespath expressly disclaims all liability in respect to actions taken or not taken based on the contents of this newsletter. Copyright © Wespath Benefits and Investments, a general agency of The United Methodist Church Share your suggestions and comments about Health Care Reform Update