The U.S. Supreme Court has handed down decisions on two significant cases that have direct or indirect implications for employer-sponsored retirement and healthcare benefit plans. This Client Action Bulletin summarizes these cases of interest for employers that sponsor such plans.
More healthcare-related regulatory news for plan sponsors, including links to detailed information.
Supreme Court upholds ACA subsidies
The U.S. Supreme Court ruled that individuals who get their health insurance through an exchange established by the federal government are eligible for the federal subsidies available under the Patient Protection and Affordable Care Act (ACA). The court’s ruling preserves the benefits for an estimated 6.4 million Americans.
To read the court’s opinion paper, click here.
Supreme Court rules state bans on same-sex marriage are unconstitutional
The U.S. Supreme Court held that the 14th Amendment requires a state to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when a marriage was lawfully licensed and performed out of state.
To read the court’s opinion paper, click here.
CDC publishes survey on health insurance coverage
The National Center for Health Statistics (NCHS) of the Centers for Disease Control and Prevention (CDC) released selected estimates of health insurance coverage for the civilian noninstitutionalized U.S. population based on data from the 2014 National Health Interview Survey (NHIS), along with comparable estimates from the 2009–2013 NHIS. Estimates for 2014 are based on data for 111,682 persons.
To read the entire survey, click here.
CMS to remove authorized representative verification requirement from retiree drug subsidy payment requests
Currently, as a condition of requesting Retiree Drug Subsidy (RDS) payments, plan sponsors are required to submit an Authorized Representative Verification form to the RDS Center of the Centers for Medicare and Medicaid Services (CMS) acknowledging that the authorized representative listed on the application has the legal authority to bind the plan sponsor to the terms of the plan sponsor agreement. In the coming months, CMS will be removing this requirement. The RDS Center will provide additional information closer to the time of the change.
For more information, click here.
Many insurers are contemplating the financial implications that a U.S. Supreme Court ruling against federal healthcare subsidies would have on their business. This Wall Street Journal article (subscription required) quotes Milliman’s Tom Snook discussing a potential exodus from the federal exchange if tax credits are rescinded.
Here is an excerpt from the article:
Insurers offering products in the federal-exchange states are worried that they could be caught short this year. An antisubsidy ruling could potentially take effect—and prompt consumers to drop coverage—as soon as this summer. Insurers are locked into rates for 2015 and typically wouldn’t be able to raise prices midyear. And partly because of state regulations, it isn’t clear if or when insurers would be able to withdraw from the federal marketplace before January.
But for 2016, if the federal insurance tax credits are unavailable in a state, “the impact would be substantial enough that I would expect many carriers to consider pulling from the market,” says Tom Snook, an actuary with consultants Milliman Inc. who is working with a number of insurers offering exchange plans. “There’s a question, if the subsidies are struck down, if it’s an insurable market.” That could leave consumers with fewer, and far pricier, choices.
The U.S. Supreme Court has heard—and will hear—several cases that may be of interest for plan sponsors. On March 4, the Court will hear arguments on whether the federal premium tax credit subsidies available under the ACA are available to people in all states or only to those buying coverage in states with a state-run exchange. On February 24, the Court heard arguments on whether 401(k) plan participants may file a suit challenging the retirement plan’s fiduciaries’ actions that took place before the six-year statute of limitations period allowed under ERISA for filing a claim. The Court will also consider the constitutionality of state laws barring same-sex marriages and the recognition of same-sex marriages lawfully performed out of state, though oral arguments have not yet been scheduled.
This Client Action Bulletin summarizes these cases of interest for plan sponsors.
The U.S. Supreme Court’s recent decision to review the legality of the premium subsidies provision of the Patient Protection and Affordable Care Act (ACA) has major implications for the health insurance industry. In a new article, Milliman consultants Jason Siegel and Jason Karcher address several questions concerning the uncertainty the high court’s decision creates for insurers participating on the healthcare exchange.
Here is an excerpt:
How many people will use FFEs?
As mentioned earlier, APTCs are one of the major legs upon which the ACA stool stands. Individuals are required to maintain minimum essential coverage as long as it is affordable to them. Of those who enrolled in coverage through an FFE, 86% received these credits. Removal of these credits will likely reduce participation. A RAND Corporation study3 commissioned by the U.S. Department of Health and Human Services (HHS) estimates that this would decrease enrollment to 32% of what it would otherwise be. Impacts of decreased enrollment on economies of scale and volatility of claims experience should be considered when planning for 2016.
What will the morbidity of these individuals look like?
The removal of subsidies would encourage adverse selection, as there will be a tendency for the sicker of those who would otherwise receive subsidies to maintain coverage, while the healthier will tend to lapse. The same RAND Corporation study concluded that removal of the APTCs would result in a 43% increase in premiums in the individual market, which would primarily be due to the higher claims levels. Individual issuers should consider the extent to which these forces may impact their memberships and the memberships of their competitors when setting rates for 2016.
Will health plans still have sufficient incentives to participate in the exchange?
APTCs are only available to enrollees through the exchange, which has been a substantial incentive for insurers to offer their plans in the exchange market. In the absence of APTCs, the exchange user fee (3.5% of exchange premiums) may be too high relative to any remaining benefits of exchange participation. In recognition of this, the 2015 FFE contracts with health plans include a clause that these contracts may be terminated by the health plan4 in the event that APTCs are no longer available, subject to state and federal law. However, doing so may engender bad will from members who signed up through the exchange and enjoy the transparency it creates. This should be taken into account when considering exchange participation for 2016 and beyond.
To read the entire article, click here.
The U.S. Supreme Court in late June decided three cases that, while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the requirement of the Patient Protection and Affordable Care Act (ACA) that certain preventive healthcare benefits—which include coverage for contraceptives—be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.
For Milliman perspective regarding the three rulings, read this Client Action Bulletin.