Industry News

Notes from Capitol Meetings 2015

On Feb 23 and 24, I had the pleasure of attending the NAHU Capitol Conference and met with a few Congressional offices to discuss ACA. This post summarizes the important notes from my meetings.

Meetings with Members of Congress and their Staff

I (along with a handful of HAHU members) met with Reps Pete Olson, Kevin Brady, and Ted Poe. We were not able to schedule meetings with Senators Cruz or Cornyn. We spoke about the small group market, the impact of the MLR rules on agents and brokers, Medicare, and the individual market. I stressed the irrationality of metallic plan restrictions and the low out-of-pocket limitations and how they limit choice, distort plan design structures, and increase employer costs. I also spoke about COBRA and proposed eliminating it. The dialog from each office was fairly consistent. While they did not state that “repeal and replace” is no longer realistic, their body language implied that they cared more about making the system better. However, they were not interested in supporting any changes that would cost the federal government more money and they asked about whether any of the topics we raised had been studied for their financial impact. Rep Brady’s office was concerned about the idea of repealing COBRA because it might make a movement towards Single Payer easier in the future. It seems that the Republicans were organized around the ideas of Rep Paul Ryan and were committed to constructing a viable alternative to ACA.

A few of my colleagues dropped by the offices of Reps Sheila Jackson Lee, Al Green, and Gene Green. The latter two were not interested in talking. Rep Sheila Jackson Lee’s health policy advisor gave the group generous attention. Apparently, the advisor’s mother was an insurance agent and she was very familiar with the value of brokers. She took copious notes and commented that Rep Jackson Lee would fully support any legislation like the MLR bill that protected the valuable work that agents and brokers do.

ACA Rulemaking Impacting Employers

A senior advisor at the Department of Treasury (Mark Iwry) who is responsible for implementing various ACA employer provisions spoke about upcoming and recent rules. The Obama administration believes that sustaining and growing the employer-sponsored healthcare system is fundamentally essential. It is a guiding theme of the decisions they make in drafting their rules.

Employer Payment Plans. Employer payment plans are one example of the effort the Administration has taken to protect the employer system. Last week the IRS issued even more guidance (see IRS Notice 2015-17) regarding employers who contribute towards the cost of individual health insurance premiums. Employers cannot do it under any circumstances. The IRS is providing a safe harbor for small employers to become compliant by June 30, 2015. Otherwise, they will be subject to penalties and the government intends to aggressively levy the penalties (up to $100 per day per employee). There is no safe harbor for Large Employers. They face penalties immediately. The implicit message from Mr Iwry was that such arrangements could deteriorate the group market, which would cause the federal government to spend more money in subsidies than they planned and could cause unpredictable adverse selection that could destabilize the already fragile individual market.

Cadillac Tax. During Mr. Iwry’s hour-long presentation, the IRS published a long awaited notice of regulatory guidance about the so-called Cadillac Tax (see IRS Notice 2015-16). Mr. Iwry provided insight into their ideas in implementing the provision and their perspectives. The excise tax on high cost employer-sponsored coverage is effective in 2018. It is a tax levied on plan providers that applies to premium dollars (measured by the COBRA rates) in excess of a statutory level. The IRS is aware of the lack of guidance for self-funded employers in setting COBRA rates. The IRS intends to provide detailed guidance about setting COBRA rates. Soon employers will not have the same discretionary flexibility in determining those rates that they have enjoyed in the past.

Non-Discrimination Rules. One very salient provision of ACA is the extension of discrimination rules to apply to fully insured health plans. Prior to ACA, employers who offered fully insured plans were not required to comply with rules prohibiting discrimination in favor of the highly compensated. ACA required these rules to go into effect on Sep 3, 2010. The Obama Administration indefinitely postponed the enforcement because, according to Mr. Iwry, they were concerned that employers were facing so many changes that non-discrimination would inappropriately complicate employer adaptation to all of ACA’s other employer provisions. He said, “It would break the camel’s back.” They are working on drafting the rules, however he implied that they would not publish them until they believed employers were comfortably situated with everything else (e.g.: the employer mandate and reporting, community rating, essential health benefits, etc). This is good news. Perhaps it is still years away. He mentioned one topic they are wrestling with internally. There is a problem with the utilization tests under current discrimination rules. Employers who make a fair offer to all employees can violate the rules if too few of the lower wage earners actually enroll. This is beyond an employer’s control. They are hoping to release practical guidance, however they are having trouble reconciling past regulation (pre-ACA) with current law and circumstance (post-ACA).

Other Items. During the Q&A session, Mr. Iwry seemed to be very interested in feedback the audience provided about how (under current rules) employer contributions towards HSAs and HRAs change the actuarial value of the health plan. Because small group health plans are required to meet a metallic coverage level (Bronze, Silver, Gold, or Platinum), the rules essentially restrict the generosity of employers. He said they would review the issue. Mr. Iwry noted that the IRS is operating on a shoestring budget and there is very little money to enforce many of ACA’s provisions, an issue that is not likely to change in the current environment.

The Reality of ERISA Enforcement

Perhaps one of the most intriguing presentations was delivered by Kim Langer, a senior investigator with the Department of Labor. The DOL continues to operate on a budget equivalent to their 2004 budget (well before ACA was even an idea). The DOL is not hiring more auditors or expanding their role in auditing employers. Ms. Langer distinguished the types of violations that require monetary penalty from violations that require only prospective compliance. The DOL is primarily concerned about the big fish and violations that adversely impact beneficiaries. They have to be smart with their time. Examples of violations that require monetary penalties are embezzlement of funds from self-funded plans and situations where a benefit is denied that should be covered under the law or terms of the employer’s plan document.

The DOL is not interested in assessing penalties for non-malicious, unintentional “reporting and disclosure” violations. If an employer is not compliant with ERISA disclosures (e.g.: wrap documents or providing materials under the framework of current law), the DOL’s standard procedure is to help educate the employer about how to comply and to ensure that the employer become compliant and stay compliant in the future. The employer may receive a citation, but will likely never be fined for reporting and disclosure violations.

Contrary to popular belief, the DOL does not randomly select employers for audit. Investigations occur when the DOL becomes aware of a potential violation—complaints by current or former employees, Form 5500 inconsistencies, referrals from state departments of insurance, insurance providers, the media, health care providers, etc. There are less than 500 investigators nationwide and 3.5 million employers who offer health insurance (1 investigator per 7,000+ employers).

I inferred that brokers should keep an arm’s distance from ERISA compliance among their employer clients. A broker should advise that there are certain reporting and disclosure requirements the employer is responsible for, direct employers to the DOL website for more information, and provide a contact for a third party administrator (like TASC) should the employer require professional assistance. Brokers should not provide their own wrap documents or assume an active role in fulfilling the requirements.

This entry was posted in Industry News, Our Perspective and tagged , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.