by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Questions (and Some Answers) About Employer-Sponsored Health Coverage In the Wake of the Dobbs Decision
- By now, you are well-aware of the Dobbs decision, where the Supreme Court ruled that the regulation of abortion shall be decided at the State level.
- Analysis: The politics associated with this decision abound. And as per usual, I will NOT opine on the politics. Instead, I will focus on some important questions that a lot of people are asking, which are:
- Will employer-sponsored health plans cover abortions and/or abortion-related medical services?
- Does it matter if the coverage is fully-insured or self-insured?
- Anything else?
Will employer-sponsored health plans cover abortions and/or abortion-related medical services?
Let me start at the 30,000 foot-level: It is important to understand that offering health benefits to employees (whether those health benefits are fully-insured or self-insured) is a VOLUNTARY DECISION. In other words, an employer is NOT required by law to offer health benefits of any kind if the employer CHOOSES NOT to do so. As I have always told you, the primary reason employers offer health benefits in the first place is to attract and retain talented workers. Employers also want their employees to remain in good health, which promotes productivity and presenteeism (while limiting absenteeism). The demand for comprehensive health benefits is high among employees, especially in a tight labor market. In response, many employers offer their employees access to a wide-range of medical items and services that can be accessed through broad provider networks. HOWEVER, consistent with the VOLUNTARY nature of offering health benefits, an employer sponsoring a health plan may – provided specific non-discrimination rules are satisfied – limit the “types” of medical items or services the plan will cover and not cover. Employers may also limit the amount of reimbursements for certain medical items or services (again, consistent with non-discrimination rules). And, the employer-sponsor has the discretion to determine the breadth of the plan’s provider network.
Which leads me to this answer: Consistent with the VOLUNTARY nature of an employer sponsoring health benefits, currently, a health plan is NOT required to cover abortions or abortion-related services. As a result, currently, some employer-sponsors CHOOSE to cover abortions and/or abortion-related services in some form, while other employer-sponsors CHOOSE NOT to cover abortions or abortion-related services.
Does it matter if the coverage is fully-insured or self-insured?
I purposefully used the word “currently” when noting whether a health plan is required to cover abortion and/or abortion-related services or not – because – things COULD CHANGE. What I mean here is this: States are allowed to enact laws that, for example, require fully-insured employer-sponsored health plans offered within the State to cover certain medical items or services. This “type” of law is referred to as a “benefit mandate law.” In response to the Dobbs decision, a State could enact a “benefit mandate law” requiring a fully-insured employer-sponsored health plan offered within the State to cover abortions and/or abortion-related services. This “benefit mandate law” could ALSO require “individual” market plans to cover abortions and/or abortion-related services.
What about employer-sponsored self-insured plans?
When it comes to a self-insured plan, the “benefit mandate law” I described above would NOT apply. That is because ERISA preempts ANY State law that requires a self-insured plan to cover specified medical items or services. As a result, even in States with a “benefit mandate law” that may require fully-insured employer plans (and individual market plans) to cover abortions and/or abortion-related services, this State “benefit mandate law” would NOT apply to self-insured plans. Thus, consistent with the VOLUNTARY nature of offering health benefits, employer-sponsors of a self-insured plan offering a plan within this State MAY CHOOSE to cover abortion-related services in some form, while other employer-sponsors offering a plan within this State MAY CHOOSE NOT to cover abortions or abortion-related services.
A State could enact a law that PROHIBITS a fully-insured employer plan (and an individual market plan) from covering ANY abortion-related services, including paying for “travel benefits” to a State that permits abortions. To me, this would be the inverse of a “benefit mandate law,” but – at least to me – it would nonetheless qualify as a “benefit mandate law,” meaning, this law would STAND and REMAIN applicable to fully-insured employer (and individual market) plans. HOWEVER, in cases where a State enacts such a PROHIBITORY law, this type of State law would STILL NOT apply to self-insured plans. Thus, as stated above, employer-sponsors offering a self-insured within this State MAY CHOOSE to cover abortion-related services in some form, while other employer-sponsors offering a self-insured plan in the State MAY CHOOSE NOT to cover abortions or abortion-related services. HOWEVER, instead of going the route of ONLY enacting a PROHIBITORY “benefit mandate law” (which, as stated, would NOT apply to self-insured plans), a State may choose to enact a CRIMINAL law that, for example, imposes criminal penalties on the employer-sponsor and/or the self-insured plan’s administrator or other third-party service providers. There is question as to whether ERISA preempts this type of State CRIMINAL law, especially if the CRIMINAL law does NOT “relate” directly to the health plan, rather the CRIMINAL law is directed at the employer-sponsor and/or third-party service providers. This latter point is very important for those employer-sponsors of self-insured plans that want to provide “travel benefits” for abortions and/or abortion-related services. As stated, such a decision on the part of the employer-sponsor (to offer “travel benefits”) is VOLUNTARY. BUT, could CRIMINAL liability attach to making such a VOLUNTARY decision? To me, this will remain an open question unless and until a court of law (maybe even the Supreme Court) answers it for us.
Supreme Court Rules That Employers Can Limit Reimbursements for Certain Medical Items or Services
- In a lesser-known Supreme Court decision that came down last week, the Court ruled that an employer-sponsor of a self-insured health plan does NOT violate the law if the employer-sponsor places limits on the reimbursements for certain medical items or services that are applied UNIFORMLY to ALL participants of the plan.
- Analysis: In this particular Supreme Court case, the employer-sponsor of a self-insured plan limited the reimbursements for dialysis services for participants with end-stage renal disease. DaVita (the dialysis service provider) filed suit, arguing that the limitation was discriminatory, and thus, violated the law (here, the Medicare Secondary Payer rules). HOWEVER, the Medicare Secondary Payer rules say that if a limitation on a covered item or service is applied UNIFORMLY among ALL participants in the plan, such a limitation is NOT discriminatory. This same non-discrimination rule can be found under ERISA and the Tax Code, so for a benefits attorney-geek like me (who is not necessarily a student of the Medicare Secondary Payer rules), this decision makes total sense. And – at least to me – this decision merely confirms what us benefits attorney-geeks, along with our employer-sponsor and plan administrator-clients already know (because we told them), which is:
- So long as (1) you (the employer-sponsor) impose limitations on things like reimbursements for specified medical items or services UNIFORMLY among ALL participants – AND – so long as (2) you (third-party service provider) administer those limitations on a UNIFORM basis, you are each satisfying the non-discrimination requirements under the law (i.e., ERISA, the Tax Code, and, for example, the Medicare Secondary Payer rules). So then, what are the implications of this ruling? From a benefit design perspective, not much other than to confirm what I just said above. BUT, this confirmation is important for those employer-sponsors (and even insurance carriers) that adopt “cost-containment programs.” This confirms that such cost-containment programs are PERMISSIBLE, so long as any restrictions and/or limitations under said cost-containment programs are applied UNIFORMLY among ALL participants. Similarly – and consistent with the VOLUNTARY nature of offering health benefits (as discussed above) – employer-sponsors of self-insured plans may carve out certain medical items or services from the plan’s coverage, and such carve-outs will be PERIMISSIBLE under the law, provided…wait for it…such carve-outs are applied UNIFORMLY among ALL participants. Last comment: This particular Supreme Court case also tells us that employer-sponsors can pick and choose what providers are in-network and what providers are out-of-network (although we already knew this). BUT, with (1) the new surprise medical billing rules that are now effective, coupled with (2) the public disclosure of in-network rates and out-of-network allowed amounts that will start on July 1st, PLUS (3) this Supreme Court case, I believe that employer-sponsors and their service providers are going to be more selective in their provider contracting, and these employer-sponsors will now have greater leverage when it comes to provider contracting. We’ll have to wait and see if I am right or wrong here. Stay tuned…
Health Care Policy Update
1332 Waiver for a “Public Option” – Approved for Colorado
- Way back in Nov. 2020 – right after Former Vice President Biden was elected President Biden – I developed a list of policy items that I expected Congressional Democrats and the Biden Administration to pursue over the next 2 to 4 years.
- Analysis: That list included things like:
- COVID “Special Enrollment Period”
- Increasing the ACA’s Premium Subsidy Amounts and Expanding Eligibility
- “Standardized” ACA Exchange Plans
- Medicare “Buy-In” Program
- 1332 Waiver for a “Public Option”
Although the Medicare “Buy-In” Program idea died with the “Build Back Better Act” last year, the other 4 items on this list came to fruition, including the Biden Administration green-lighting a 1332 Waiver submitted by Colorado (CO) that would allow the State to REQUIRE insurance carriers selling “individual” and “small group” market plans to ALSO offer a “public option” plan. It appears that CO took a page out of the Federal government’s book by mirroring HHS’s recently finalized “Standardized” Plan proposal. What I mean is: According to HHS’s “Standardized” Plan proposal, in every rating area where an insurance carrier is offering a non-“standardized” plan, the carrier MUST ALSO offer a “standardized plan.” Similarly, under CO’s 1332 Waiver, any insurance carrier that is offering an “individual” market plan (or a “small group” market plan) in any county in the State MUST ALSO offer a “public option” plan in that county. However, unlike the “Standardized” Plan proposal, the “public option” plan MUST be offered BOTH on- and off- CO’s State-based Exchange. The “public option” plan is itself akin to a “standardized” plan. Here, the “public option” plan must meet specific network adequacy standards, including “being culturally responsive and reflective of the diversity of enrollees in the network’s service area.” The most important – and impactful – feature of CO’s “public option” plan is that the premiums for the plan itself MUST GO DOWN over a 3-year period. Specifically, the “public option” plan’s premium MUST GO DOWN by 5% starting in the 2023 plan year. Then, DOWN by 10% in 2024. And then DOWN by 15% in 2025. In 2026 and beyond, premiums may ONLY INCREASE by the cost of “medical inflation.” If the carriers in CO are UNABLE to reduce the premiums by the required targets, the CO Department of Insurance may assist in lowering the premiums by first, scheduling public hearings where the carriers and providers may attempt to defend their rates. If premiums are NOT reduced on account of the public hearings, the CO Department of Insurance will “require providers to accept rates necessary to meet the reductions requirements,” and the carriers will be required to contract with those providers that have agreed to lower reimbursement rates. If a provider does NOT lower their reimbursement rates, the provider will be subject to fines imposed by the Department of Insurance. It is estimated that 32,000 CO residents will enroll in the “public option” plan by 2027. Last comments: Okay, so we knew this was coming, so we should NOT be surprised to see it. Also, we knew what to expect when it comes to a “public option” which is: The only way premiums will be lower is if the plan reimburses providers at a lower rate. Interestingly, I saw a statistic indicating that CO providers typically charge close to 290% of Medicare. The “public option” plan will likely require reimbursements at 175% to 225% of Medicare to achieve the premium reduction targets. I am NOT saying that I support – or oppose – this reduction in reimbursement rates. I am just trying to tell that you that this is where CO’s Department of Insurance will likely land. And, I am trying to signal that this is the type of “price control” that could serve as a template for what could be achieved at the Federal level if and when a “public option” is once again debated at the Federal level (but who knows when that will be…).
Extension of the “Enhanced Premium Subsidies”??
- Congressional Democrats and outside stakeholders are TURNING UP the volume on the need to extend the “enhanced premium subsidies.” Note, I am STILL standing by my 1% chance, but admittedly, it could be slightly higher than that at this stage of the game (but ONLY 5%).
- Analysis: I am STILL keeping the percentage low because – as I explained – the ONLY way the “enhanced premium subsidies” may be extended (for say, 2 years) is if Congressional Democrats can pass a “reconciliation” bill through the House and Senate by Sept. 30th. By my count, there are ONLY 23 legislative days before Sept. 30th. AND, like I said in my last update, agreeing on ALL of the provisions of the “reconciliation” bill will TAKE TIME. It will also TAKE TIME to vet whatever is agreed upon with the Senate Parliamentarian. I just can’t see how it all gets done in 23 legislative days. At the end of the day, could we see a “reconciliation” bill that ONLY includes a 2-year extension of the “enhanced premium subsidies” paid for with prescription drugs reforms?? Maybe. BUT, both Sen. Manchin (D-WV) and progressive Democrats WANT some sort of “climate change” reforms enacted before the Democrats lose the majority in the House (which is likely to happen in the upcoming mid-term elections). So again, I just can’t see how Sen. Manchin and progressive Democrats let go an opportunity to get those “climate change” reforms done, which brings us back to the vicious cycle of (1) disagreements/infighting and (2) the real possibility that some of the “climate change” reforms FAIL to meet the “reconciliation” rules (which then leads to disagreements/infighting). Heck, maybe Democratic Leadership cancels August recess to get something done. If that happens, maybe I increase the percentage of something happening to 10% or higher. But right now, I’m sticking with a 1% to 5% chance.