Is the Office of Personnel Management trying to squeeze Congress into the D.C. small business Exchange to help stop other employers from funding individual market health plans?
News outlets can be forgiven if they didn’t bother to draw attention to the final rule issued by the Office of Personnel Management (OPM) on how members of Congress and their staff will be insured through Exchanges under Obamacare. What with the insurance policy cancelations, the premium increases, the exchange website malfunctions and the attendant low enrollment in exchanges, people have been understandably preoccupied with the more explosive parts of the Obamacare wreck.
The final rule issued on September 30, however, made a significant change from the proposed rule released on August 7. OPM originally proposed that members of Congress and their staffs would enroll in individual market coverage on Exchanges throughout the country, but the final rule now requires them to obtain coverage through the D.C. small business exchange.
If this change were simply an effort to more faithfully execute the requirements of the law, then the change might be no big deal. But regulations issued by the Departments of Treasury and Labor on September 13 suggest an ulterior motive. In making the change, OPM might actually be working to support the Obama administration’s other effort to stop all employers from offering defined contribution health plans to fund individual market premiums.
When OPM proposed to enroll Members of Congress and their staffs in individual market coverage back in August, OPM confirmed that payments would still be excluded from taxable income. But, as the Obama administration’s right hand was offering this proposal, the administration’s left hand was issuing regulatory guidance over at the Departments of Treasury and Labor to prohibit employers from funding individual market coverage.
IRS Notice 2013-54 and Dept. of Labor Technical Release No. 2013-03 hold that employer payments for individual coverage violate Obamacare’s prohibition against annual dollar limits on the value of benefits and the requirement to provide preventive services without any cost sharing. If Congress were to fund individual market premiums as OPM proposed, then Congress would violate these provisions.
Technically, this might be okay. The text of Obamacare requires Congress to obtain coverage through an exchange “notwithstanding any other provision of law.” But think about the public relations nightmare sure to ensue when people figured out that members of Congress and staff were obtaining individual market coverage with pre-tax dollars and no one else in America could.
Yet there’s a bigger problem for the Obama administration. Congress obtaining individual market coverage pre-tax would also shine a light on the utter absence of any legal basis for prohibiting every other employer in America from doing the same, which, to date, has also gone unnoticed and unreported by the media.
It’s hard to fathom how employers funding individual market coverage violates the annual dollar limit and preventive services requirements. The two requirements apply to both group and individual market coverage in just the same way. Consequently, an employee with employer-funded individual market coverage will receive the same annual dollar limit protection and the same preventive services with no out-of-pocket costs as someone with group coverage.
So why can’t an employer health plan be, as the regulators say, “integrated” with the individual market? The Obama administration’s explanation basically amounts to “because we said so.” All they say is that employer payments cannot be integrated with individual health plans to satisfy the requirements. There is no rationale given as to why.
Prohibiting employers from funding individual market plans is a pretty big deal that demands much more attention. This type of health plan arrangement could play a strong, if not lead role in creating a more dynamic and competitive health insurance market that actually contains costs and improves quality. That’s because it empowers individuals to choose and to own their health plan as opposed to depending on the government or their employer to choose for them. And it does so while maintaining a strong role for employers in funding and coordinating their employee’s health care.
The connection between OPM’s final rule and the guidance issued by Treasury and Labor should lead to an uncomfortable conclusion for many members of Congress. By obtaining coverage in the small business exchange, Congress may be complicit in undermining a key strategy to improve America’s access to higher quality, more affordable health plans.
I’m currently finishing up a report on the new guidance restricting employers from funding individual market coverage. So in future posts, I will have much more to say on that topic, as well as the requirement on Congress to obtain coverage in the small business exchanges.