by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- In my last update, I kind went off on the Trump Administration’s decision to ask the 5th Circuit to strike down the entire ACA. Well, I wasn’t the only one taken aback by this particular move. Congressional Republicans shared my view. So, when asked whether they would take up another ACA “repeal and replace” bill, House and Senate Republican Leadership said NO. House Leadership actually asked the President to re-consider his “ask” to strike down the law. And, Senate Leaders like Sen. Grassley (my old boss while I was on Senate Finance, and now Chairman of the Committee) pointedly stated that the decision to repeal the ACA is now in the hands of the Courts, not Congress.
- Analysis: Which is somewhat related to my point above when I said that the battle over health care policy continues to rage on in the Courts. To me, we are in a sad, sad state-of-affairs when the Courts are determining health care policy. Yes, Republicans started this era of the “new normal” by becoming litigation-happy during the previous Administration. And now, well, pay back is a, well you know. But the traditionalist in me is so very disappointed that we can’t make health care policy the proper way. Through a Congressional act, that the Executive Branch is then responsible for implementing. Our Founders didn’t create the Judicial Branch to get in the way of making policy, with only certain exceptions to that rule. So what’s the latest on ACA “repeal and replace”? Earlier this week, the Department of Justice asked the 5th Circuit to expedite their consideration of this infamous Texas v. Azar case. If granted, the 5th Circuit would hold oral arguments some time in July, which would mean we would likely see a ruling within a couple of months after that (i.e., some time in the Fall). Interestingly, an expedited ruling plays well for President’s Trump political push to be re-elected in Nov. 2020. What I mean is this: President Trump backed off of his initial insistence that Congressional Republicans take-up another ACA “repeal and replace” bill, only to publicly state that his Administration will be releasing an ACA “repeal and replace” proposal “soon.” At this point, we don’t know when we will see such a proposal, but I do expect that we will see a proposal. Regardless of how the 5th Circuit rules in Texas v. Azar, the case will be appealed to the Supreme Court. And regardless which way the 5th Circuit rules, the time is ripe for the Trump Administration to trout out their ACA “repeal and replace” proposal. Why? First, because people will be paying attention. So, if people are paying attention, why not strike-while-the-iron-is-hot? In this case, get out in front of the Democrats (who will no doubt say that people will lose their pre-existing condition protections) by telling the American public how “the Trump health care proposal” will preserve the pre-existing condition protections. Then, continue to hit on your health care proposal as the Presidential campaign starts to heat up throughout the Winter and into the early part of 2020. Then, you are smack in the middle of the Presidential campaign with primaries, etc. So to me, asking for an expedited ruling is actually a smart political play (compared to asking the 5th Circuit to strike down the entire ACA, which was an ill-advised play in my opinion). The bottom-line is that Republicans need a health care proposal to “run on,” whether it is a good proposal or not. Creating a vacuum like we saw during the mid-terms will allow the Democrats to continue to pummel Republicans on the issue of health care. At least Republicans – or at least the President in his re-election bid – will have something to talk about. Whether the ideas resonate with the American public remains to be seen.
- At this stage, I have no idea what the Trump Administration’s health care reform proposal might include, but I can venture to guess. I am sure we will see Health Savings Account (HSA)-related policies, along with other ideas like (1) providing more flexibility so employers can give their employees a tax-free contribution to purchase an “individual” market plan and (2) codifying the “association health plan” (AHP) regulations. States will definitely be given more flexibility to come up with their own health care reform ideas, along with additional funding under a Graham-Cassidy-type of approach. And, States will be given more flexibility to add “work requirements” to their Medicaid program, and also the ability to voluntarily shift their Medicaid program to, for example, a per-capita cap model. Drug pricing proposals will no doubt top the list.
- Analysis: When it comes to HSAs, I find it interesting that all of the talk of enacting HSA “improvements” has all but stopped since the Democrats took back the majority in the House. Make no mistake, it is not as if people are not talking about the HSA “improvements” (that – by the way – actually had bi-partisan support last year). But, with the new make-up of Congress (i.e., a Democratic House and Republican Senate) – along with a vocal progressive wing of the House Democratic Caucus – there is NO movement on the issue. And while some House and Senate Republicans are talking about introducing various pieces of last year’s HSA “improvements,” the bills are dead-on-arrival. The only hope is if Republicans have some negotiating leverage during the upcoming battles over spending and raising the “debt limit.” But, Republicans will likely want to “horse-trade” more pressing policy changes in non-health care areas. This all leads me to say this: There is no doubt in my mind that any forthcoming Administration proposal will – at a minimum – allow individuals to maintain their HSA-eligibility even if they are enrolled in a high-deductible health plan (HDHP) that pays first-dollar coverage for chronic care services. For the past 2 years, the White House has been kicking around the idea of releasing some sort of guidance on this “chronic care” issue – in the form of a Request for Information (RFI), for example – but we are still waiting. So, instead of issuing the RFI, I could see the White House choosing to address this issue through their own health care plan. It is a good issue to talk about, especially in the context of pre-existing conditions. We will likely also see all – or mostly all – of the other HSA “improvements” we saw last year. When it comes to employers giving their employees a tax-free contribution to purchase an “individual” market plan, as you know, we are all waiting for final regulations that would clear the path for this practice, albeit with some guardrails. One of these guardrails subjects an employer to an “all-or-nothing proposition” (i.e., the employer must decide whether it wants to sponsor a group health plan OR sponsor the individual market plan-contribution arrangement, but NOT both, for similarly situated employees). This same guardrail was included in the “small business HRA bill” that was enacted at the end of 2016, and in truth, this guardrail limited take-up of the small business HRA among small employers. Sooo, query whether this guardrail should be eliminated? If this guardrail is not eliminated in the forthcoming final regs (which we hope to see by June), I could very well see this guardrail getting eliminated in the Administration’s health care plan. It is definitely PRO-small business, and thus, a strong concept to campaign on. The argument: This is just another alternative that small employers may choose from. Enrolling in an “association health plan” (AHP) is another, which is something that I foresee making it into the Administration’s health plan as well, especially in light of the recent District Court ruling invalidating the AHP final regs (which we will discuss below). Last few comments: We will certainly see changes to Medicaid. I would assume the Administration does not want to come out with a proposal that can be characterized as throwing millions of people off of their Medicaid coverage (like what we saw during the 2017 “repeal and replace” exercise). But, I have no doubts that we will see a codification of “work requirements.” This would be a direct response to the Court battles that the Administration recently lost, where the Courts struck down the Administration’s recent “work requirements,” telling HHS that they have to come up with better reasons for why the “work requirements” can lawfully be a part of the Medicaid program. We will also see more flexibility for the States. You heard me tell you a while back that HHS has been developing various “model” 1332 Waivers. As you may recall, HHS released some “model” Waiver ideas, but a strong argument can be made that while these recently released “model” Waivers had a lot of detail to them, much more detail is needed before States are going to pull-the-trigger on them. We could very well see more specific 1332 Waiver ideas in an Administration’s health care plan, like allowing States to adopt a “defined contribution” model where employers and the government partner together to help subsidize employees’ – and independent contractors’ – health coverage. Also, State-sponsored savings accounts for cost-sharing expenses and to cover other health care-related spending. Drug pricing will certainly be the top-line plank of any health care plan. As we all know, drug pricing is the BIGGEST issue in health care. It is #1 in the minds of voters. And Congress is busy trying to enact the only health care policy that they can enact, which is drug pricing policy changes (because Congress is not about to enact ACA “improvements” (which Democratic Leadership wants) and their not about enact HSA “improvements” and other policy changes like codifying the AHP regulations (which Republican Leadership wants)). While some may argue the various drug pricing-related bills that Congress is currently considering only makes marginal changes around the edges, if you aggregate all of these small changes, you end up making a good dent. You have to start somewhere. The Administration’s health care plan will no doubt build on what Congress is doing, as well as expand on what the Administration has been actively doing to reduce prescription drug costs. Stay tuned on all of this.
Association Health Plan Update
District Court Judge Finds That the Final AHP Regulations Are Invalid
- On March 28th, the DC District Court ruled that the DOL’s final AHP regulations are invalid. It is expected that the Department of Justice (DOJ) will appeal the ruling. And, it is expected that the DOJ will request a “stay” of the ruling until the appeals process is exhausted. It is unclear whether the District Court Judge will grant a “stay.” We will all just have to wait a couple of weeks to find out.
- Analysis: Let me first give you my emotional response to the ruling: In my opinion, the District Court Judge – Judge Bates – clearly adopted a policy position that was adverse to AHPs. And that policy position was that the he believed AHPs are an “end-run around the ACA.” In other words, the Judge felt that the sole purpose of the DOL’s final AHP regulations was to get around the ACA’s requirements by allowing more AHPs to form. The Judge went so far as to say that he believed that the current Administration was simply trying to change a law that a previous Congress enacted because the current Administration simply did not like the law. Here is my problem with this: Regardless of whether you agree or disagree with the Judge on the above point, Judges are NOT supposed to rule based on their own policy position. Judges are supposed to rule in accordance with the law, irrespective of whether they agree or disagree with the policy. In my opinion, the Judge did NOT rule in accordance with the law. I believe the Judge developed a policy position, and then he wrote a legal opinion as means to his own policy ends. People will no doubt disagree with me though. Here is another problem I have: It appears that the basis for the Judge’s conclusion that AHPs are an “end-run around the ACA” is because AHPs – like large employer plans – are not subject to the ACA’s “essential health benefits” (EHB) requirement. The Judge clearly did not like this result, and he made his view known not only in words, but by the outcome of the case. BUT, the Judge overlooks that – to date – ALL of the AHPs that have formed in accordance with the final AHP regulations are VOLUNTARILY covering all or virtually all of the EHBs. And when I say “virtually all,” the AHP is not covering things like pediatric dental. Make no mistake, I am not trying to minimize pediatric dental. I am just trying to make the point that all of the AHPs formed in accordance with the final regs are covering the core EHBs like maternity, mental health, prescription drugs, physician and hospitalization services, and the less talked about EHBs like habilitative care. Now, some people may be saying, Chris, we agree with you, we think it is great that all of the AHPs that have formed under the new regulations are “doing the right thing” and voluntarily covering the EHBs, but what about AHPs that may be formed in the future by unscrupulous people? They are NOT going to cover all or virtually all of the EHBs, and that is what we are afraid of. My response: I don’t disagree with you. BUT, you should not invalidate a regulation because you are concerned about what might happen in the future. And, if the EHBs are so important to you (i.e., those States who are parties to the litigation), why not pass a State law requiring AHPs to cover the EHBs. I am by no means advocating for this, but you can do this without invalidating a regulation and taking health coverage away from people. Your law will be “saved” from ERISA preemption for fully-insured AHPs, and you can regulate self-insured AHPs any which way you want under your State MEWA law. The bottom-line is this: AHPs are NOT an “end-run around the ACA.” AHPs – JUST LIKE ACA-compliant individual and small group market plans – ARE subject to the ACA’s “coverage requirements,” which means AHPs:
- Cannot deny a person coverage if they have a pre-existing condition.
- Cannot impose annual and lifetime limits on the essential health benefits covered under the plan.
- Cannot rescind coverage absent fraud or misrepresentation.
- Must include internal and external appeals processes (and provide notice).
- Must allow participants a choice of a primary care physician, pediatrician, and OB/GYN.
- Must provide direct access to emergency services.
- Must eliminate waiting periods that exceed 90 days.
- Must cover the cost of clinical trial participation.
- Must provide a Summary of Benefits and Coverage.
- Must limit out-of-pocket spending to out-of-pocket maximums.
(and I could go on, but this list is already long enough)
AHPs are also subject to ERISA’s fiduciary, notice and disclosure, and private right of action requirements, which – by the way – individual market plans are NOT subject to. AHPs are also subject to other laws like: Mental Health Parity; COBRA continuation requirements; HIPAA nondiscrimination and privacy requirements; The Newborns’ and Mothers’ Health Protection Act; Women’s Health and Cancer Rights Act; and The Genetic Information Nondiscrimination Act. Also, State benefit mandates apply to fully-insured AHPs, and States have the exclusive authority to regulate self-insured AHPs.
Here Is Another Thing About the District Court Ruling You Won’t Read In a News Article
- There are 4 ACA requirements that AHPs – like large employer plans – are NOT subject to. The first is the EHB requirement, which we discussed above. The others are the “actuarial value” requirement, the “adjusted community rating” requirement, and the “single risk pool” requirement. Nowhere in Judge Bates’ decision did he talk about these latter 3 ACA requirements. The Judge only focused on the EHB requirement, which again, appears to be the basis for his belief that AHPs are an “end-run around the ACA.”
- Analysis: Now, not only do I wish that the Judge knew that ALL of the AHPs formed under the final regulations are VOLUNTARILY covering all or virtually all of the EHBs, I also wish the Judge knew that coverage of the EHBs by ACA-compliant individual and small group market plans is NOT as full-proof as most people believe. What I mean is this: It is well-established that virtually all of the ACA-compliant individual and small group market plans that are currently available have “narrow networks.” Why is this important? Because the ACA only requires individual and small group market plans to cover the full cost of EHB benefits/services performed at an “in-network” facility once the plan participant’s out-of-pocket maximum limit is met. BUT, if a plan participant is treated at an “out-of-network” facility, yes, the plan must cover the cost of the EHB benefits/services, BUT the plan participant is NOT protected from any costs that may exceed the ACA’s out-of-pocket maximum (because under the ACA, out-of-network costs are NOT counted toward the out-of-pocket maximum). The AHPs that have formed under the new regulations, on the other hand, have much broader “networks” than ACA-compliant individual and small group market plans. And, because AHPs are subject to the ACA’s out-of-pocket maximum limits – and because AHPs are voluntarily covering all or virtually all of the EHBs – AHPs are actually providing BETTER coverage than the ACA requires. Is that an “end-run”? Come on people, get with the program! Here is another thing to take notice of: Reading through the opinion, it does not appear to me that the Judge – and his law clerks – understand how the ACA applies to large employer plans, and also AHPs. On page 4 of Judge Bates’ opinion, he explains that unlike AHPs, large employers have a choice: Either cover the ACA’s EHBs or pay a penalty tax. The problem with this statement is that large employers are NOT required to cover the EHBs under ANY provision of the ACA. It is true that the ACA’s employer mandate penalty tax provision requires large employers to provide “minimum value,” which means large employers must cover at least 60% of the cost of the benefits covered under the plan, or pay a penalty tax. BUT, the employer mandate does NOT require large employers to cover the EHBs. It appears that Judge Bates has been convinced that AHPs are bad because AHPs are not required to cover the EHBs. And again, it appears that this is the sole basis for his claim that the final AHP regulations are an “end-run around the ACA.” I will note, I do not disagree with Judge Bates in his concern that AHPs are not required to cover the ACA’s EHBs. I want AHPs to provide comprehensive coverage too. But what drives me nuts is that AHPs are not only VOLUNTARILY providing comprehensive coverage, but based on all of the rules I enumerated above, AHPs are REQUIRED to provide comprehensive coverage. And again, AHPs are offering broad “provider networks.” I know I sound like a broken record, but AHPs are NOT an “end-run.”
If the Final AHP Regulations Are Ultimately Thrown Out, What Might States Do?
- By my count, there are 20 States that have either (1) issued a public statement (e.g., a Bulletin, or Letter, or Regulation, or FAQ) conforming to the final AHP regulations OR (2) they haven’t issued a public statement but based on actions of the State, they tell us that they are conforming to the final AHP regulations. Another 12 States are either (1) currently considering OR (2) they have already enacted legislation to conform to the final AHP regulations in one-way-shape-or-form (e.g., some are focused only on fully-insured AHPs, others just focused on self-insured AHPs, and other States are putting guardrails around AHPs formed under the final regulations). This is compared to the 11 States and the District of Columbia that filed suit against the final AHP regulations. For the remaining States, I have not seen a clear signal of where they land.
- Analysis: Why is this important? Because this shows me that there are 25 to 30+ States that seem to agree with the “policy” set forth in the final AHP regulations. This is compared to the 11 States and DC who are resisting AHPs primarily for political reasons (yes, there is a policy disagreement too, but you can’t tell me with a straight face that this is NOT political). So, if the final AHP regulations go away, what might States do? Well, I could very well see a good portion of the 25 to 30+ States continuing to move forward with their conformance with the “policy” set forth in the final AHP regulations. In this case, I could very well see States enacting their own State laws – or promulgating their own regulations – allowing “unrelated” employers to band together to form a fully-insured “large group” or self-insured AHP, and ALSO, allowing self-employed individuals to participate in a fully-insured “large group” or self-insured AHP. In the case of a self-insured AHP, a State can 100% do this with no questions asked from a legal perspective. Why? Because States have the exclusive authority to regulate self-insured AHPs any which way they want. And, if the State wants to allow “unrelated” employers – along with self-employed individuals – to participate in a self-insured AHP, the State CAN definitely do it. In the case of a fully-insured “large group” AHP, however, it is not as clear-cut. What I mean is this: The previous Administration took the position that the ACA’s insurance market rules preempted a State’s law that allowed fully-insured “large group” AHPs to form. The only exception to this rule was if the group of employers forming the fully-insured AHP was a “bona fide group or association of employers.” Interestingly, instead of over-turning this “ACA preemption” position held by the previous Administration, the current Administration maintained this position, while choosing to expand what it means to be a “bona fide group” through the final AHP regs. Soooo, if this “ACA preemption” position is still applicable – and the expansion of what it means to be a “bona fide group” goes away – will States be able to pass their own State law (or promulgate their own regulation) allowing these “NON-bona fide groups” to form a fully-insured “large group” AHP? A strong argument can be made that the answer here is NO, because the “ACA preemption” should nullify the State law/regulation. HOWEVER, this “ACA preemption” of a State law – which prohibited “NON-bona fide groups” from forming a fully-insured “large group” AHP – was never challenged in a Court law? Query whether a State would take HHS to Court over this question? Also query this: Maybe a State still moves forward with enacting a State law or promulgating a regulation, they don’t take HHS to Court challenging this “ACA preemption” issue, but instead, they ask the current Administration NOT to enforce the “ACA preemption” provision? This way, the State can move forward with allowing these “NON-bona fide groups” (i.e., groups of “unrelated” employers and “groups” wanting to offer coverage to self-employed individuals) to form a fully-insured “large group” AHP. But what happens if and when we have a Democratic Administration? Will this new, Democratic Administration decide to enforce this “ACA preemption” provision? Maybe. But by then, there will likely be hundreds of AHPs covering hundreds of thousands of lives. Unwinding these arrangements will cause people to LOSE their health coverage (just like the District Court ruling will cause if it goes into effect within 60 days). I don’t think a future Democratic Administration wants this type of coverage disruption on their hands (but then again, if they move to Medicare-for-All, then everyone’s coverage will be disrupted). Last comment: Speaking of 1332 Waivers, why can’t States allow “unrelated” employers and self-employed individuals to participate in a fully-insured “large group” AHP through a 1332 Waiver? My answer: I think they CAN. I believe that – through a 1332 Waiver – a State can modify the ACA’s individual, small group, and large group market definitions, along with the definitions of a “small employer” and “large employer” (check out ACA section 1304(a) and (b)). Here – through the 1332 Waiver – the State can also explicitly put into their law the “aggregation rule” you have heard me talk so much about (i.e., allowing the employees of the employer members of a “group” to be aggregated and counted together as if they were employed by a single-employer) (check out ACA section 1304(b)(4)). Also, there is a possibility that a State can re-define the term “employer” under the Public Health Service Act (PHSA) to allow self-employed individuals to participate in a fully-insured “large group” plan (here, an AHP). Allowing “unrelated” employers and self-employed individuals to participate in a fully-insured “large group” AHP through a 1332 Waiver would have to meet 1332’s 4 Guardrails. Under the “Comprehensiveness Guardrail,” the coverage must be “at least as comprehensives as an essential health benefit (EHB) plan.” As stated, ALL of the AHPs formed under the final AHP regs would meet this. The second guardrail – known as the “Affordability Guardrail” – says that the coverage must provide the same level of protections for cost-sharing and out-of-pocket expenses as required under the ACA. ALL of AHPs formed under the final AHP regs would meet this too. The third guardrail – known as the “Coverage Guardrail” – requires the State to provide coverage to the same amount of people who obtained coverage on account of the ACA. Based on CBO’s projections (see the attached op-ed I wrote), AHPs will produce a “coverage gain” for at least 400,000 people, AND – according to CBO – there will be “no noticeable coverage losses,” so there is a good chance this Guardrail will be met. Lastly, the fourth Guardrail – known as the “Budget-Neutral Guardrail” – says that the Waiver cannot increase the Federal deficit. For AHPs, there is a chance – but no guarantee – that this Guardrail could be met. It will depend on how much tax revenue is lost if more people enroll in an AHP, and it will depend on how much the premium subsidies amounts may increase if premiums in the remaining “individual” market happen to go up. The bottom-line here is that States have options, with or without the final AHP regulations.