Health+Benefits the December 2014 issue

ACA Catch-22

Obamacare regulators have made parts of the act unworkable. Only compromise will fix this mess.
By Scott Sinder Posted on December 1, 2014

The Affordable Care Act is re-emerging as a potential flashpoint, yet Sen. McConnell already is disabusing his colleagues of the notion that repeal-and-replace is a viable path forward. Instead, he is emphasizing more targeted changes that presumably could be acceptable to the president if properly packaged.

About those targeted changes, a few suggestions: Think of increasing the ACA full-time employee threshold from 30 to 40 hours per week. And how about eliminating or at least re-casting the individual mandate?

From my perspective, the biggest potential ACA reform effect could come not from changing the law but from requiring the administration to properly implement two of its core provisions.

The biggest potential ACA reform effect could be the implementation of two core provisions.

When the law was passed, critics complained it did little to address skyrocketing costs. Two noteworthy exceptions were the national benchmark plan provisions and wellness. Through the Department of Health & Human Services, the administration has failed to implement the former. And through the Equal Employment Opportunity Commission, it is doing its best to gut the latter. Let’s unpack this a bit.

National Benchmark Plan

The ACA requires HHS to establish a single national benchmark plan that is required to incorporate all of the requisite Essential Health Benefit (EHB) requirements. The national benchmark plan is supposed to serve as the template for every state, federal and partnership exchange (for small businesses) and every marketplace (for individuals). The expectation was that the basic benchmark plan would be streamlined and economical. If a state’s mandates exceeded the benchmark requirements, the state could continue the mandates if it paid any subsidies associated with the mandates’ extra insurance premiums.

This requirement was expected to lead to the widespread elimination of thousands of state mandates. Unfortunately, none of that happened. HHS decided instead to delay the benchmark plan until at least 2016. In the interim, HHS directed each state to develop its own benchmark plan, which generally can be based on the state’s most widely sold plan.

HHS also unilaterally decreed any mandate in place prior to the ACA’s enactment could be included in a state’s benchmark without exposing it to the mandated financial obligations. Because every pre-ACA plan was required to include a state’s mandate requirements, none of the expected mandate reform has transpired. This has at least three critical consequences:

  • Basic” exchange policies are much more expensive than they should be
  • The federal subsidy obligations are much higher than they should be (because the federal government is subsidizing all of the state mandates)
  • It is much more complicated than it should be for a small business to insure employees in multiple states.


At least from an aspirational perspective, the biggest potential cost-curve-bending ACA initiative was the expansion of the tools an employer can deploy to incentivize participation in wellness programs. For health-contingent programs, an employer can offer up to 30% of the premium value (which includes both employer and employee contributions). Also, there are a number of safeguards designed to ensure everyone has the opportunity to qualify for the incentive.

Participatory programs, however, are a twist on the Woody Allen maxim that 90% of life is just showing up. All you have to do is show up to qualify. The classic example is a health risk assessment (HRA), which often is combined with biometric screening. Because anyone who wants to should be able to participate in this type of program, there are no restrictions on the size of employer incentives to encourage participation.

Most employers offer HRA-type screening while more than 70% of employees with access to group health benefits can qualify for an incentive reward. It appears clear the use of HRAs and biometric testing can help fulfill the ACA preventive care cost control objectives. Last year, CVS garnered national headlines for imposing a $50 per month penalty on any plan participant who did not participate in an HRA.

The EEOC, however, believes benefit plan incentives violate both the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act of 2008 (GINA) because the screenings are medical tests that are impermissible conditions of employment.

The most recent EEOC salvo is a complaint against Honeywell. The EEOC alleges the company’s incentives violate ADA and GINA. Although the federal district court has denied EEOC’s preliminary injunction request, if the EEOC is successful it would create a significant hurdle for most employers tying benefit plan premium incentives to screening programs. Nothing could be more at odds with the wellness regime to which the ACA aspired.

So what can be done? Congress can vote with its pocketbook and condition HHS and EEOC appropriations on properly implementing these two core ACA initiatives. HHS must develop and put into place the national benchmark plan, and the EEOC must comport its views of ADA and GINA compliance to the statute’s wellness dictates.

Both of these issues should present ripe opportunities for Sen. McConnell and Pres. Obama to engage in the type of cooperation both assert they are seeking. The benefits could be significant.

Scott Sinder Chief Legal Officer, The Council & Partner, Steptoe & Johnson LLP Read More

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