Hard Rock: Twist and Shout

I love December—the holidays, the good cheer, the self-congratulatory reflection.

It’s January that’s difficult—starting over as if we are each a proverbial Sisyphus, set to begin the arduous journey of rolling the same old rock up the hill once more.

The Affordable Care Act is our rock. And the federal government treats our industry like Sisyphus. No matter how many times we roll that rock up the hill, our government continues to put up hurdles that prevent us from reaching the summit.

To start with, Congress bestowed two aggressively sought ACA adjustments. First, the budget agreement unexpectedly repealed the not-yet-implemented automatic group health plan enrollment requirements for new hires at companies with more than 200 employees. Then, in October, in the middle of The Council’s Insurance Leadership Forum in Colorado Springs, Congress passed the PACE Act. This eliminated the ACA’s 2016 expansion of the definition of “small employer” to groups of 100 (along with related “community rating” and market reform requirements that apply to small groups). Now, under federal law, “small employers” remain employers with 50 or fewer full-time employees. But! Let’s roll the rock a little farther. States are permitted to expand that definition to groups of up to 100 if they choose to do so. And California, Colorado, the District of Columbia, New York, North Carolina, Vermont and Virginia apparently will do just that. 

Finally, the Equal Employment Opportunity Commission issued proposed wellness regulations that would mostly negate its previously expressed view that any wellness-related health screen or medical test is a per se violation of the Americans with Disabilities Act or the Genetic Information Nondiscrimination Act. Nevertheless, in 2016 we will continue working to close the gap between the EEOC and the ACA wellness rules. Employers must be able to operate their plans within a coherent regulatory framework. (Is that rock feeling a bit heavier?)

Two other issues will dominate the ACA agenda in 2016: pursuit of the “Cadillac Tax” repeal and issuance of nondiscrimination rules, which could dramatically alter plan design going forward.

We think establishing a national standard benchmark plan as the ACA requires also should be on the agenda. It could blunt some of the negative Cadillac Tax ramifications while also addressing some of the regulators’ nondiscrimination rule objectives.

The Cadillac Tax was intended to “incentivize” employers to minimize costs associated with “excess” or overly generous benefits for corporate executives. The prospect of the 2018 rollout of the tax, however, may penalize employers who offer no-bells-and-whistles coverage at minimum value. Why? Because the ACA drafters failed to account for what really drives healthcare costs: geography, industry, age, gender, claims, size of group and general level of healthfulness in a given group. A recent Towers Watson survey concluded, for example, that a whopping 82% of employers could cross the threshold by 2028.

In fact, there is a very real possibility, with ever-rising healthcare costs, that employers who merely satisfy the ACA’s minimum-value shared-responsibility requirements will someday be subject to the tax. It’s a Catch-22: it is untenable for employers to satisfy the requirements to avoid one ACA penalty only to trigger another.
Treasury officials have also informed us they intend to craft “nondiscrimination” rules that would be violated if lesser-paid employees do not participate at levels on par with more highly paid staff. The government appreciates the difficulty of imposing a retrospective participation test, and it intends to create a liability “safe harbor” for employers who only offer plans that satisfy the minimum value requirements as well as satisfy a yet-to-be determined affordability metric.

The problem here is many lower-paid employees are not buying minimum-value plans. They don’t even participate in the slimmed-down plans employers offer to satisfy the basic ACA mandates. 

There is one potential avenue that could, at least partially, alleviate some of these dilemmas: the imposition of a single, standard, streamlined national benchmark plan. Under the ACA, the Department of Health and Human Services is required to establish such a benchmark, which would become the standard basic plan in all state exchanges as well as the “small group” market. The ACA dictates that, if a state imposes mandates that go beyond the benchmark plan, the state would be required to pay the subsidy associated with any premium for those extra benefits. The expectation was that the benchmark plan would be basic and affordable and the subsidization requirement would lead to massive mandate reform.

But to date, HHS has punted. Instead, it has allowed each state to establish its own benchmark plan. Just to be crystal clear, HHS regulations specifically relieve states from any subsidy obligations associated with mandates that pre-date the ACA. So this is an opportunity lost, at least as of now.

We need to push this rock back up the hill in 2016. Maybe collectively we can push it over the top.