Fate Uncertain for HHS’s Extension of ACA Discrimination Protections to Abortion & Gender Transition

In May 2016 HHS issued a final rule implementing the Affordable Care Act’s Section 1557 nondiscrimination provision, which applies to recipients of funding from HHS. The rule prohibits discrimination on the basis of gender identity and termination of pregnancy, as well as race, color, national origin, sex, age, and disability. The new rule has been interpreted to require covered entities to perform and provide insurance coverage for gender transitions and abortions, regardless of their contrary religious beliefs or medical judgment.

The HHS rule has been challenged in court at least twice. On December 31, 2016, the U.S. District Court in Wichita Falls, Texas enjoined nationally the portions of the rule prohibiting discrimination on the basis of gender identity and termination of pregnancy. Franciscan Alliance, Inc. v. Burwell, Civil Action No. 16-cv-00108. The Order was appealed by the ACLU and the River City Gender Alliance and the appeals remain pending.

The Trump Administration has not indicated whether it will challenge the Court’s injunction and enforce the rule. The current Administration position favoring repeal of ACA in its entirety is consistent with the policy changes already made by the Trump administration. On February 22 the Departments of Education and Justice withdrew agency guidance that mandated transgender student access to restrooms consistent with gender identity. In late March President Trump appointed Roger Severino to head HHS’s Office of Civil Rights (OCR) which is charged with enforcing the HHS rule. Although Severino’s appointment has been controversial, as yet there is no indication from the OCR as to its enforcement position under new HHS leadership.

In the only other reported case brought under the rule’s prohibition of discrimination based on gender identity, on December 6, 2016 the U.S. District Court in Oakland, California stayed further proceedings in a case challenging an employer’s denial of gender transition health coverage. Robinson v. Dignity Health, Civil Action No. 16-cv-3035. The stay was granted pending the outcome of Gloucester County School Bd. v. G.G., a case scheduled for hearing before the Supreme Court. However, on March 6 the Supreme Court remanded the case back to the Court of Appeals for further consideration in light of Justice’s and Education’s withdrawal of guidance on February 22.  The California court has continued the stay in the Robinson v. Dignity Health case based on the pending bankruptcy of the plaintiff and scheduled the next hearing for May 19.

The Supreme Court’s action suggests that courts across the country may be taking a “kick the can down the road” approach on the Section 1557 rule as the Trump Administration has promised to repeal and replace ACA, or alternatively that the Court prefers to review the case only when the Court is back to full strength. Currently, the HHS rule’s provisions relating to gender identity and termination of pregnancy remain enjoined nationally.

If you have any questions or would like to discuss how the Section 1557 rule affects you or your business, please contact Patrick W. McGovern, Esq. at 973-535-7129 or pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq. at 973-535-7134 or gmschneider@nullgenovaburns.com or Ryann M. Aaron, Esq. at 973-387-7812 or raaron@nullgenovaburns.com.

IRS Proposes Restrictions on Employer Opt-Out Payments for ACA Coverage Waivers

In early July the IRS issued proposed regulations addressing the effect that employer payments to employees who waive employer-sponsored health coverage, known as Opt-Out Payments, have on determining whether an ACA-covered employer must pay an ACA penalty known as the Affordability Penalty. Generally, the proposed regulation will apply to Opt-Out Payments adopted after December 16, 2015, but there will be a phase-in period for Opt-Out Payments in labor agreements.

By way of background, ACA-covered employers are subject to a monthly Affordability Penalty for each full-time employee who (1) is required to pay more than 9.66% (indexed for 2016) of the employee’s household income to purchase self-only coverage under the employer’s health plan (“employee premium payment”) and (2) instead purchases individual coverage through an ACA exchange. In determining the amount of the employee premium payment and whether the affordability standard is satisfied, the proposed regulations would allow the employer to exclude the value of any Opt-Out Payment from the employee premium payment, but only where receipt of the Opt-Out Payment is conditioned on the employee’s (1) declining employer-sponsored coverage and (2) providing reasonable evidence that the employee and all other individuals for whom the employee expects to claim a personal exemption deduction have minimum essential coverage (other than coverage in the individual market, whether or not obtained through an ACA exchange).  This example illustrates when the value of an Opt-Out Payment would be excluded in calculating the employee premium payment: Employer offers its employees coverage under a plan that requires Employee to contribute $3,000 for self-only coverage. Employer also makes available to Employee a payment of $500 if Employee (1) declines to enroll in the plan and (2) provides reasonable evidence that Employee and all other members of B’s expected tax family are or will be enrolled in minimum essential coverage through another source (other than coverage in the individual market, whether or not obtained through the Marketplace). The Opt-Out Payment provided by Employer is a conditional Opt-Out Payment as defined under the regulations, and, therefore, Employee’s required contribution for self-only coverage under the plan is $3,000 since the $500 Opt-Out Payment is disregarded.

On the other hand, the value of an unconditional Opt-Out Payment (i.e., Opt-Out Payments conditioned only on waiving coverage) must be included in the calculation of the employee premium payment in determining affordability.  Therefore, any unconditional Opt-Out Payment will increase the employee premium payment, and make it less likely that the premium payment will come below the 9.66% household income percentage limit. Under the same facts as in the example above, except that eligibility for the Opt-Out Payment is unconditional, the $500 Opt-Out Payment increases the employee premium payment from $3,000 to $3,500, regardless of whether the employee accepts or declines the employer’s offer of coverage.

The proposed regulations are subject to public comment and our firm will continue to monitor and report on any developments. In the meantime, we recommend that ACA-covered employers review their current and planned Opt-Out Payment arrangements to determine how these payments will be treated under the proposed regulations and what adjustments must be made to avoid ACA penalties.  If you have any questions or for more information regarding the impact of the proposed regulations or ACA requirements generally on your organization, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com in the Firm’s Employee Benefits Practice Group.

ACA’s Employer Penalties Delayed To 2015 But Remaining 2014 Requirements Unchanged

On July 2, 2013 the U.S. Treasury Department announced that enforcement of the Affordable Care Act’s (“ACA”) employer penalties will be delayed until 2015. Under ACA businesses with at least 50 full-time employees plus full-time equivalents that do not offer affordable health coverage to at least 95% of their full-time employees and dependents are subject to monetary penalties.

The Treasury Department stated that the one year delay “will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”  The Treasury Department will provide guidance regarding reporting requirements for insurers, self-insuring employers, and other parties that provide health coverage later this summer.

The Treasury Department’s announcement affects no other ACA provisions.  The state and federal health care exchanges are still scheduled to become operational on October 1, 2013.  Likewise, the effective date for health insurance purchased on the exchanges remains January 1, 2014.

If you have any questions or for more information about ACA and its impact on your organization or your employees’ benefit plans, please contact Patrick W. McGovern, Esq.pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com, or Phillip M. Rofsky, Esq., profsky@nullgenovaburns.com, in the Firm’s Employee Benefits Practice Group.