Automatic Enrollment: Another Bone in the ACA Graveyard?

UPDATE:  President Barack Obama signed into law H.R. 1314, the Bipartisan Budget Act of 2015 described below, on November 2, 2015.

In the five years since the Affordable Care Act was enacted, a number of its provisions have died the legislative death known as repeal.  If enacted, the Bipartisan Budget Act of 2015 currently pending in Congress would add another bone to the ACA graveyard, in that it would repeal Section 1511 of the Affordable Care Act, which, through amendment of the Fair Labor Standards Act, would have required employers with more than 200 full-time employees to automatically enroll new full-time employees in their group health plans, subject to later opt-out.  The original effective date of this provision was unclear, but the Department of Labor put its enforcement on hold until regulations issued.  No regulations were issued, and now it looks like this provision, which was never a high-priority ACA item for the government, may never go into effect.

Other ACA measures that have previously been repealed include the mandated expansion of the definition of a “small employer,” for small group market purposes, from 50 to 100 employees. Although originally slated to take effect nationally for plan or policy years beginning on or after January 1, 2016, the PACE Act of 2015 made expansion of the definition is now a state-by-state decision (and as we discussed earlier, California’s expansion is slated to go into effect for 2016).

Another prior ACA casualty of note to employers was repeal of the cap on annual deductible amounts for health plans in the small group market, which happened (essentially retroactively) under the Protecting Access to Medicare Act of 2014.   (The repealed limits would have been $2,000 for an individual and $4,000 for a family.)  The ACA continues to cap annual maximum out-of-pocket amounts, and further requires that, effective for 2016 plan years, that a separate individual out-of-pocket maximum (an “embedded” maximum) applies to each person covered under family coverage, even before the family maximum is reached.

In the ACA’s earlier days, legislators put a stake in the heart of the free choice voucher provisions, which would have required employers who offered a group health plan to provide vouchers to certain employees to enable them to purchase exchange coverage.  The first major ACA casualty was and the public long-term care insurance program for employees, (“CLASS Act”), which was repealed, without ever having gone into effect, in the American Taxpayer Relief Act of 2012.

The last two ACA provisions that employers would most like to see repealed are the Cadillac tax, slated to go into effect in 2018, and nondiscrimination rules for fully-insured group health plans. Plans to implement the Cadillac tax, set forth in Internal Revenue Code § 4980I, appear to be progressing forward, as the IRS has issued two pieces of guidance this year, in the form of Notices 2015-16 and  2015-52, proposing interpretations of the rule and soliciting public comments on a number of points.  The fate of the nondiscrimination rule for insured plans, codified at Public Health Service Act § 2716, and incorporated into the Code via Section 9815, is less certain.  The rule is intended to provide, for non-grandfathered insured plans, a parallel to the nondiscrimination rules applicable to self-insured plans under Code § 105(h). In general terms, such a rule may make certain plan designs, including many executive/management “carve outs” such as special coverage tiers and accelerated plan entry, difficult or impossible to sustain.  In 2011, the IRS delayed enforcement of the rule until regulations were issued and no regulations have issued to date.  And since then, it has not included the rule on its annual list of priority tax guidance projects, including the most recent version for the fiscal year ending June 30, 2016, as updated for the first quarter of that period.  The IRS could still issue nondiscrimination guidance any time, however, and employers with non-grandfathered, insured plans should not assume that repeal will rescue them from this additional compliance burden.

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Filed under Affordable Care Act, Benefit Plan Design, California AB 1083, California Insurance Laws, California SB 125, Health Care Reform, Health Insurance Marketplace, Nondiscrimination Rules for Insured Health Plans, Small Group Coverage, Small Group Expansion

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