Vol. XVIII, Issue 3

January 10, 2019

Systems Unavailable—Saturday, January 12

The Benefits Access plan sponsor and participant portals will be unavailable for system maintenance Saturday, January 12 from 6:00 a.m., Central time until Saturday afternoon. We apologize for any inconvenience.

Court Decision Invalidates ACA

At the end of 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which changed one provision of the ACA—eliminating the penalty for failing to obtain “minimum essential coverage.” (See September 2018 ACA Legislative and Regulatory Update). As a result of this change, a number of states and individuals sued the United States and the Departments of Treasury and Health and Human Services (HHS) in a district court in Texas, claiming that the reduction of the individual mandate penalty to zero rendered the individual mandate unconstitutional.

The court issued a decision (partial summary judgment) on December 14, 2018, finding the mandate unconstitutional in Texas, et al. v. USA, et al. (Case No. 4:18-cv-00167-O). The decision cited prior Supreme Court precedent, which had upheld the mandate before the change, because it was the basis for a constitutional exercise of Congress’ taxing power (for those who violated the mandate). Significantly, the Texas Court also ruled that, without the mandate, Congress would not have wanted the ACA to remain in place and, consequently, invalidated the entire Affordable Care Act (ACA).

On December 30, 2018, the Court entered partial final judgment, but also issued a stay (delay) of its judgment pending appeal. An appeal to the Fifth Circuit Court of Appeals is expected. Because of this stay, the decision will not cause any changes to the ACA until the expected appeals are exhausted.

Departments Propose Rule to Allow HRAs to Pay for Individual Health Coverage

Under the Obama Administration, the Internal Revenue Service (IRS) had ruled that health reimbursement arrangements (“HRAs”) were group health plans, and thus were required to comply with the provisions of the ACA like the ban on annual limits for essential health benefits. The IRS also ruled that, under certain conditions, an HRA could be considered “integrated” with a major medical group health plan, and the combination could satisfy the ACA, but indicated that an HRA could not be integrated with an individual policy.

Prompted by an Executive Order suggesting that the Treasury Department, the Department of Labor (DOL), and HHS issue regulations to allow HRAs to be used with individual coverage, these three departments (“Departments”) issued a proposed rule at the end of October 2018. (See proposed rule.) If this rule is finalized, would effectively reverse the Obama administration rule and permit HRAs to be used to purchase individual coverage effective January 1, 2020, under certain conditions:

  1. The terms of the HRA must require the participant to enroll in individual health coverage that complies with the ACA (with procedures to verify enrollment)
  2. The employer sponsoring the HRA may not offer a choice between a traditional plan and the HRA integrated with individual coverage: any class of employees offered the HRA may not be offered a traditional plan and vice-versa.
  3. With exceptions for age and number of dependents, the HRA must be offered on the same terms to all in a class, and the classes permitted are limited to: full-time, part-time, seasonal, employees covered by a collective bargaining agreement, employees that have not satisfied the waiting period, employees who have not reached age 25, non-resident aliens with no U.S. income and employees whose primary site of employment is in the same insurance rating area.
  4. The HRA must provide notice of the terms of the HRA to each participant, and must allow participants to opt-out of the HRA.

The employer is not limited in how much to contribute to the HRA per year, and the HRA payments are tax-free to the employee.

UMC Impact
For employers that do not sponsor a group health plan, the new rule may be appealing. The main question may be the “same terms” requirement, which would compel an employer that offers an HRA to any full-time employee to offer the HRA to all other full-time employees.

The Church Alliance, a coalition of the chief executive officers of 37 denominational benefit organizations with which Wespath is affiliated, filed a comment letter concerning the proposed rule. (See the letter.)

The letter asks the Departments to consider the special circumstances of ministers, who may be required by religious authorities to be offered a group health plan in harmony with denominational beliefs. The Departments would need to be flexible for such situations, if they wish to enable lay employees in the denomination to select individual policies with HRAs. The Church Alliance also asked the Departments to clarify that employees, including ministers, on long-term disability, may receive HRAs that will be considered “integrated” with Medicare, or otherwise deemed compliant.

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