Employers who have implemented Defined Contribution approaches to financing employee health benefits, or who are thinking about doing so in the future, can forget it. Federal bureaucrats have just made it illegal starting in 2014.
The announcement came in the form of a little-regarded “Frequently Asked Questions” (FAQ) document jointly released be the Departments of Labor, Health and Human Services, and Treasury on January 24, 2013.
This will kill promising developments such as the one John Goodman posted here a few days ago, or a more complete story about the same phenomenon published in CFO Magazine. Both these stories are about the remarkable success of a new “private exchange” (PHIX) set up by Aon Hewitt. The PHIX enabled 100,000 employees from Sears, Darden Restaurants and Aon itself to choose from a selection of health plans. Thirty-nine percent of them a chose less costly “consumer directed plan” over more expensive PPO or HMO coverage. This was up from only 12% with a CDHP the year before.
So, what dastardly deed did these employers commit that makes the federal government chose to outlaw them? They used a Health Reimbursement Arrangement (HRA) to allow employees to pay their own premiums for the plan of their own choosing.
The federal bureaucrats decided that since the Affordable Care Act (ACA, or ObamaCare) prohibits any annual or lifetime limits on the dollar value of “essential health benefits,” an HRA should be outlawed because it is a limited amount of money. Never mind that this “limited” money would be used to buy coverage that does not itself impose limits. Never mind that any premium payment by anybody is obviously limited.
Now you may think this is about the dumbest idea you ever heard of. You would be almost right. You would be right only until you actually read the FAQ for yourself.
The FAQ points out that according to the law, the Secretary of Labor was supposed to “promulgate regulations” that would require employers to issue certain written notices by March 1, 2013 –
- Informing the employee of the existence of Exchanges including a description of the services provided by the Exchanges, and the manner in which the employee may contact Exchanges to request assistance;
- If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange; and
- If the employee purchases a qualified health plan through an Exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.
Ooops! None of that stuff exists yet, so the Secretary hasn’t issued regulations, so never mind. They say they will get around to it eventually ― maybe by the late summer or fall of 2013. Maybe.
But you’ll be happy to learn that, “The Department of Labor is considering providing model, generic language that could be used to satisfy the notice requirement.” Considering it. Hmmm.
The FAQ is full of that sort of thing –
The Departments intend to issue guidance providing…
The Departments intend to issue guidance…
The Departments anticipate that future guidance will provide that…
While we have yet to issue guidance on this provision…
Pending further guidance, the Departments will…
This is like a seventh grader not doing his homework — “but I intended to do it!” It would be laughable if not for the fact that people’s lives are on the line.
My sympathies to those of you who are being directly regulated by these clowns. Maybe you could explain to them that you intended to comply, but didn’t quite get around to it. Think that would work?